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We need to consider the interests of a wide variety of those affected. As with all aspects of the tax system, we must balance the cost of compliance and enforcement
27 Jan 2009 : Column 278
of the rules with the need to protect the revenue and minimise any impact on UK markets caused by the application of the relief.

We are, of course, sympathetic to the difficulties that small UK businesses face. My hon. Friend mentioned some of the problems, which perhaps partly arise because of the phenomenon that we are discussing in the debate. The Chancellor outlined several measures in the pre-Budget report that were specifically designed to help small and medium-sized enterprises weather the tough current economic climate. For example, an HMRC scheme enables firms facing difficulties to spread their tax over a timetable that they can afford. We have agreed additional facilities with the European Investment Bank to provide lending to UK banks. We have also set up a temporary guarantee scheme.

We must recognise that it is not solely—or perhaps even mainly—the VAT advantage enjoyed by offshore internet-based retailers that affects their competitive positions in relation to UK-based small businesses. We need to bear in mind that large retailers, whether operating offshore or not, enjoy a competitive advantage simply because of their size and ability to obtain discounts from suppliers. Those advantages would be retained, whatever the arrangements and relationship with the Channel Islands. In the event that HMRC viewed an arrangement as unacceptable or abusive, it would respond to stop that in the ordinary way.

Officials in the Treasury and in HMRC are actively examining and pursuing low-value consignment relief. I cannot offer a quick solution today to the problems to which my hon. Friend has rightly drawn attention. I hope that she will take some comfort from the steps that I have set out, the action that is being taken, and the discussions that have happened and that will continue with the authorities in the Channel Islands.

Question put and agreed to.

10.29 pm

House adjourned.

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