Internet sellers of contact lenses in the Channel Islands have learnt they will be stripped of a VAT loophole from next year as part of legislation feared to risk job losses.
The UK government has decided to remove low value consignment relief (LVCR) for goods imported from the islands.
An influx of retailers selling low-value goods such as contact lenses, CDs, DVDs and memory cards has resulted in a growing fulfilment industry in the region, with 700 employed in Jersey and 600 in Guernsey.
Local businesses and politicians were fearful the policy change would impact jobs. However, Ronald Hamilton, whose Daysoft business sells contact lenses from Jersey, remained buoyant. 'When there is fog over the English Channel we just proceed with caution,' he said. 'We are very optimistic about our business model and expect that sales and head count will increase again in 2012, regardless of what the UK government thinks up.'
It follows an announcement in the UK's Budget in March that the value threshold for items to be free of VAT was to be reduced from £18 to £15.
Latest legislation to remove relief altogether will be implemented from April 1 2012.As a result, Channel Island goods will be subject to full UK VAT - currently 20 per cent - with the government expecting to generate around £100m per year from the changes.
BCLA president, Shelly Bansal, said: 'The BCLA welcomes the government's decision to end LVCR for goods shipped from the Channel Islands. It remains to be seen whether the change will lead to a "fairer" market for contact lenses and care products, however, it will undoubtedly affect those companies that have used this VAT loophole to ship contact lenses and related products from the Channel Islands via their online businesses. Some may choose to absorb the VAT costs within their businesses, while others may choose to increase their product costs and/or close any distribution businesses on the islands.'