The Guardian has reported:
Administrators to the failed music store Zavvi have sold the internet rights to its name to an online retailer that sells CDs and DVDs to British shoppers via a VAT-free offshore tax loophole.
The Hut.com already provides VAT-free online offers from its Guernsey warehouse for UK internet customers of Tesco, Asda, Dixons and WH Smith. The company — which claims to have about 16% of the online market for CD, DVD and games sales — is keen to build its own online brands and is expected to use Zavvi as a launch pad.
The sale, for a undisclosed sum, comes a month after the Barclay brothers acquired the Woolworths website from administrators, promising to relaunch it by the summer. The Hut.com is already trading through Zavvi.co.uk, shipping CDs, DVDs and games from Guernsey, and books, perfume and lingerie from the UK mainland.
The key feature of the report is this:
Asked if the tax loophole provided an unfair advantage, The Hut.com founder Matt Moulding said: "Everybody does it. If you look at the main players you've got Amazon, HMV and Play who have got 80% of the entertainment marketplace and they're offshore. And we make up pretty much the balance, we have about 15%, 16% now … If you aren't offshore you couldn't possibly compete. Your cost price would be above what people would be retailing at." Campaigners against the tax loophole have suggested it contributed to the demise of hundreds of high street music stores by offering home delivery at prices typically 10% cheaper than those available in shops. The European commission is investigating complaints from British retailers including Holland & Barrett that the VAT dodge has ballooned hitting stores beyond music retailers. The retailers feel complaints are not being dealt with fairly by the UK government which has sought to play down the extent of VAT-free trade.
My emphasis added.
It is illegal under UK law for the UK to allow Low Value Consignment Relief to distort the home market for products. But that is exactly what is happening here.
The time to stop this abuse has surely arrived.
The UK has a duty to protect the UK High Street for a start. But more than that: this is undermining the credibility of UK tax law, day in and day out. It is vital that the credibility of our law be upheld. There is a point of principle at stake here. No government can ignore that.
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Just a quick note: Zavvi already made heavy use of the Guernsey TAX loop hole through it’s web-site.
Exactly Richard. Now what everyone in the UK music retail business has known for years (and what Jersey and Guernsey VAT free fulfilment appeasers have denied)is official. Whatever you think of the EU, LVCR or VAT avoiding retailers this puts the UK Treasury on very dangerous ground indeed, opening them up to possible legal action in the European courts from UK VAT payers for breaching EU law. The precendent already exists for allowing the incorrect implimentation of a directive to damage a business. Its not a difficult argument to make.
We sell household electronics accessories such as batteries, cabling etc. Not only are Channel Island sellers using the non-VAT regime to their obvious benefit on price defferentials but they are now using the non-VAT regime in the current economic climate to put real pressure on UK sellers margins to such an extent that unless you are an importer into the UK you cannot compete. From what importers tell me the Channel Island sellers are selling many electronic accessories at very little, if any, profit. Talk about an abuse of a dominant position. Can it possibly be right that a small number of retailers such as Amazon, Hut, Play and Zavvi can have such a dominant position. Sometimes it can be a community rather than an individual that abuses that position.
This has got to stop now before there won’t be any on-line UK sellers in this market, never mind high street shops. It is in effect blantant subsidising of Channel island businesses by EU governments and the UK government in particular. Furthermore, typical of fraudulent trading, every £1 lost by a legimate UK trader means revenue lost by HMRC.
Stuart Thompson LLB Hons
@Stuart Thompson
Hi Stuart any chance you can give me a call. Richard has my contact details. You might be able to help me end this.
Stuart
Please mail me and I’ll forward to Richard – for whose credibility I am happy to vouch
Richard Murphy