Beware, EU purchases. Tax and handling fees

[Kneerly Down]

Didn't you say it was just being paid elsewhere, rather than in the UK? That's not avoidance. Paying less tax in a legal manner sounds like good business sense.

I've never denied it made good business sense.
Even if it were something 'we' could do though, we wouldn't, as shifting product backwards and forwards just to avail a tax loophole is not the right thing to do from our viewpoint....not everything is about the bottom line.
It was a perverse system though and I'm glad it's no longer available.

Presumably that company's product is now more expensive as a result?

Not currently, they'll be taking a smaller margin though.

[Kneerly Down]

It reads to me like they were using a loophole to good effect. Whether that is a good or a bad thing depends on whether you like the entity that doing it.

Not really.
I don't think it is to 'good effect' if food is transported hundreds of miles out of the country, and then hundreds of miles back in for no reason other than the tax loophole itself.

I didn't think that would be such a controversial point.

[Horse]

I don't think it is to 'good effect' if food is transported hundreds of miles out of the country, and then hundreds of miles back in for no reason other than the tax loophole itself.

I didn't think that would be such a controversial point.

- Ethically bad to transport stuff to minimise tax? Well, yes, but. Businesses exist to make profit.
- Unfair advantage to the industry big boys because they can? Perhaps, but they probably look at the little boys and point out their relatively small overheads (dividends to shareholders, maintaining all of the corporate overheads, etc).
- Environmentally bad? Yup? Although the raw materials are presumably not locally grown, so high food miles for a non essential / luxury product.
- Money away from the UK exchequer? Seemingly previously paid elsewhere, at a rate low enough to cover all of the costs incurred, so a result of the UK's choices on rates applied?

Don't think anyone's arguing with any of that.

[Kneerly Down]

Make your mind up

It's been nearly 20 years since I did my MBA and nearly 30 since I did my accountancy, but EoS is in relation to production being made cheaper due to increased volume.
This mechanism didn't make production cheaper. Indeed 'production' (if you were to include the extra cost of shipping outside the UK before sending it back to the UK) cost increased.

From a technical perspective I don't think adding operating costs to avoid having to charge UK VAT is an example of 'economy of scale'.

In any event, from a 'Brexit being good for the UK' I think less being paid on activities outside the UK and more being paid to the UK exchequer is, on balance, good for the UK, which was the question I originally posited this to.

[Kneerly Down]

...so a result of the UK's choices on rates applied?

The UK didn't have a choice on rate applied or the conditions of it being imposed, as part of the EU - at least, not sufficient latitude of choice.

[Kneerly Down]

- Environmentally bad? Yup? Although the raw materials are presumably not locally grown, so high food miles for a non essential / luxury product.

For the filled chocolates, most of the raw materials, other than the cacao are Scottish grown/produced, some of it from the next glen along. Part of the company ethos is using, where possible, the most local produce and reducing environmental impact, while still providing luxury chocolates.

And since Brexit the chocolate being used is also processed in the UK.

[Horse]

...so a result of the UK's choices on rates applied?

The UK didn't have a choice on rate applied or the conditions of it being imposed, as part of the EU - at least, not sufficient latitude of choice.

Sorry, I misunderstood your explanation, thought you were saying that they reduced costs by exporting and paying VAT abroad at a lower rate than here. If ot was the same(ish) rate, then I don't see where the saving came from.

[Horse]

And since Brexit the chocolate being used is also processed in the UK.

But still transported around the world pre-processing. That's what I had in mind.

[Kneerly Down]

Sorry, I misunderstood your explanation, thought you were saying that they reduced costs by exporting and paying VAT abroad at a lower rate than here. If ot was the same(ish) rate, then I don't see where the saving came from.

Sent to Switzerland. Switzerland has IIRC 2.5% VAT rate.
Product then came into UK under the Low Value Consignment Relief exemption.

[Kneerly Down]

But still transported around the world pre-processing. That's what I had in mind.

Climate change needs to progress apace before we can realistically grow it here!

[slowsider]

Make your mind up

It's been nearly 20 years since I did my MBA and nearly 30 since I did my accountancy, but EoS is in relation to production being made cheaper due to increased volume.
This mechanism didn't make production cheaper. Indeed 'production' (if you were to include the extra cost of shipping outside the UK before sending it back to the UK) cost increased.

From a technical perspective I don't think adding operating costs to avoid having to charge UK VAT is an example of 'economy of scale'.

In any event, from a 'Brexit being good for the UK' I think less being paid on activities outside the UK and more being paid to the UK exchequer is, on balance, good for the UK, which was the question I originally posited this to.

It's an external factor, and would be available to your lad if his production quantities were sufficient.

[Horse]

Sorry, I misunderstood your explanation, thought you were saying that they reduced costs by exporting and paying VAT abroad at a lower rate than here. If ot was the same(ish) rate, then I don't see where the saving came from.

Sent to Switzerland. Switzerland has IIRC 2.5% VAT rate.
Product then came into UK under the Low Value Consignment Relief exemption.

Ah, that makes sense. Swiss chocolate is sooooo much tastier


Sorry, another question: was it a British company doing this, or a foreign-owned one?

[cheb]

It reads to me like they were using a loophole to good effect. Whether that is a good or a bad thing depends on whether you like the entity that doing it.

Not really.
I don't think it is to 'good effect' if food is transported hundreds of miles out of the country, and then hundreds of miles back in for no reason other than the tax loophole itself.

I didn't think that would be such a controversial point.

Granted, I'd rephrase it as profitable effect.

This isn't aimed at you BTW, just an observation from me. To it's sort of amusing when the producers of luxury and frivolous products take the moral high ground, The Body Shop under Anita Roddick come to mind. Lots of noise about how saintly they were, but still in the business of making women feel they need to buy something to make themselves look attractive. Anti cellulite cream anyone? No products tested on animals right enough, but lets not talk about individual ingredients that have been. Yes that's some time ago but there'll be a modern equivalent.

[Kneerly Down]

It's an external factor, and would be available to your lad if his production quantities were sufficient.

In any event, from a 'Brexit being good for the UK' I think less being paid on activities outside the UK and more being paid to the UK exchequer is, on balance, good for the UK, which was the question I originally posited this to.

[Kneerly Down]

Sorry, another question: was it a British company doing this, or a foreign-owned one?

UK, mostly

[Kneerly Down]

It sounds like companies here now have a good loophole, they can import raw materials at a lower tax rate and then sell to the EU without extra tax.

Only if you process it such that it changes tariff classification, otherwise it'd fail the rule of origin test.

[Mr. Dazzle]

I was genuinely interested how this VAT loophole works, purely out of curiosity. I didn't bother asking though 'cause I thought it would end up being a tedious set of replies

I'm glad someone else asked.

[MingtheMerciless]

https://www.bbc.co.uk/news/business-55734277

[Mussels]

https://www.bbc.co.uk/news/business-55734277

I saw that earlier and it disagrees with an earlier link (Which?) and the government site is very thin on info for consumers. Why is it so difficult?

[JamJar]

I saw that earlier and it disagrees with an earlier link (Which?) and the government site is very thin on info for consumers. Why is it so difficult?

Possibly because they left it to the last minute and also don't want to shout it from the rafters as when you look at the detail it looks a bit shit.