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Further changes to VAT relief ‘in the pipeline’

The Treasury is investigating further changes to VAT relief on goods imported from outside the EU, it has revealed.

The Low Value Consignment Relief (LVCR) threshold – the level below which goods imported from outside the EU are VAT-free – was lowered from £18 to £15 with effect from 1 November 2011.

However, the Government has signalled that this is unlikely to be the last change. ‘We are exploring options to further limit the relief so it can no longer be inappropriately exploited,’ said a spokesperson for the Treasury.

In March it said it would review the level of LVCR again at the 2012 Budget with a view to reducing it further.

LVCR was introduced in the UK in 1984 at a level of £18, the maximum permitted under EU law. However, the burgeoning growth of UK online sales for items such as CDs and DVDs has led to claims that British businesses are facing a competitive disadvantage.

The Government has previously said its intention is to stop the LVCR from being exploited and to ‘improve the competitive position of UK small and medium enterprises’.

According to recent estimations, the change to £15 is expected to net the Treasury an extra £15 million by 2015/2016.