Treasury monitors VAT-free imports

The Treasury has vowed to keep a close eye on companies importing goods into
the UK from tax havens after a small business lobby group criticised music giant
HMV for selling CDs and DVDs VAT-free out of Guernsey.

The Forum for Private Business said HMV and other leading retailers such as
Tesco, Woolworths and Boots, were costing government ‘tens of millions’ in lost
revenue by selling VAT free merchandise from the Channel Islands.

The FPB said it had ‘reported’ HMV and the Guernsey government to the
Treasury, HM Revene and Customs and the National Audit Office.

‘This whole deeply cynical exploitation of the Channel Islands tax status is
utterly unacceptable and wrong,’ said FPB chief executive Nick Goulding.

A Treasury spokesman said the Government was keeping the issue ‘under close
review’, but added that what HMV was not acting illegally by operating out
Guernsey.

‘We are aware that a number of businesses are restructuring in order use this
relief to sell goods to customers in the UK, free of VAT,’ the spokesman said.
‘Whilst this practice is legal, the government continues to keep this issue
under close review.’

An HMV spokesman, meanwhile, refuted the claims by the FPB that the music
giant was acting unethically by establishing itself in Guernsey.

‘Contrary to what the FPB has been asserting, we are not suddenly operating
in Guernsey to take advantage of the tax reliefs,’ the spokesman said. ‘The move
has been planned for a long time now and there are a number of other reasons
besides tax relief behind the decision.’

As the law stands now, goods imported into the UK are generally chargeable
with VAT, but there is a relief from import VAT for commercial consignments
received from outside the EU, of a value not exceeding £18.

The NAO is investigating how much tax revenue is lost through the Channel
Islands as part of a report on e-commerce.