Lobbyist bays for VAT loophole closure
The Forum of Private Business (FPB) has reported HMV to the Treasury and HM Revenue and Customs after the retailer's plans to shift its web operation to Guernsey. The entertainment retailer was hoping to take advantage of a VAT loophole.

Accoring to the FPB, the complaint has led to an investigation by the National Audit Office over the Treasury's lost revenues as businesses take advantage of the Channel Islands' VAT regulations.

At the beginning of this month, Retail Week revealed HMV's Guernsey plans to undercut the competition by selling music and DVDs online, without charging VAT.

However, the FPB accused HMV of being manipulative and anti-competitive.

FPB chief executive Nick Goulding said: 'This whole deeply cynical exploitation of the Channel Islands tax status is utterly unacceptable and wrong. Independent record shops and online retailers are telling us they cannot buy CDs and DVDs from their distributor at the price they are being sold in the Channel Islands.

'This is patently anti-competitive. Why the hell should retail giants gain a competitive advantage over small businesses by manipulating the tax system? There must be a level playing field.'

HMV has categorically refuted the claim that it is moving its mail order operations to Guernsey purely to take advantage of a VAT loophole.

HMV Europe MD said: 'It should be evident that this is a real and lasting commitment by HMV to Guernsey, which will also deliver benenfits to our hmv.co.uk customers. Other businesses will testify to the numerous advantages they have gained from being based on the island and even without the current tax regime there, HMV would be happy to continue with its operations.'