HMV go mental with a nice legal loophole
HMV is extending to its high-street stores a controversial VAT-avoidance scheme that it currently operates solely through the group’s website, which is based offshore. The move will offer shoppers discounts and free delivery on out-of-stock titles, at the expense of Treasury coffers.
The retailer is planning to install instore “HMV Delivers” kiosks in its 250 stores. Customers will be able to place orders for CDs, DVDs, Blu-ray Discs and console games and avoid the 17.5% VAT charged on conventional instore purchases.
The terminals bring a ballooning offshore tax ploy, already exploited by major music and DVD websites including HMV.com, to Britain’s high streets. The ploy is a fundamental challenge to the government’s direct taxation regime. If copied by other high-street chains and supermarkets, it could divert hundreds of millions of pounds from the Treasury. Woolworths is also testing similar terminals in three stores.
HMV’s new terminals offer “free home delivery” not from the group’s London distribution centre, but from its base on the Channel Islands tax haven of Guernsey. The extra expense of postage is paid for many times over by avoiding VAT.
How it works
The tax ploy, which is not unlawful, works by exploiting a VAT exemption on goods priced below £18 that are imported by individuals into the UK from outside the European Union. Known as “low value consignment relief”, it has been enshrined in European law for 15 years. But the arrival of online retailing has seen the relief, originally designed to ease the administrative burden on marginal trade, exploited on a scale that was never anticipated.
Do you want to save?
Obviously lopping 17% off the price is a hefty saving. So how much can you save? Here’s an example:
Desperate Housewives
Series three DVD: instore, £27. HMV.com, £17.99. (All HMV.com prices include home delivery). HMV.com+MutualPoints, £17.45
Prime Suspect
10 DVD boxed set: instore, £25. HMV.com, £17.99. HMV.com+MutualPoints, £17.45
Brothers and Sisters
Series one on DVD: instore, £30. HMV.com, £17.99. HMV.com+MutualPoints, £17.45
There Will Be Blood
DVD: instore, £14.99. HMV.com, £12.99. HMV.com+MutualPoints, £12.60
Harry Potter: Years 1-5
10 DVDs. Instore, £25. HMV.com, £17.99. HMV.com+MutualPoints, £17.45
Coldplay: Viva la Vida
CD: instore, £10.99. HMV.com, £8.99. HMV.com+MutualPoints, £8.72
Duffy: Rockferry
Instore, £10.99. HMV.com, £8.99. HMV.com+MutualPoints, £8.72
Paul Weller: 22 Dreams
Instore, £9.99. HMV.com, £8.99. HMV.com+MutualPoints, £8.72
