MPs Question UK VAT Exemption For Retailers

by Jason Gorringe, Tax-News.com, London

03 February 2005

A tax rule allowing UK retailers to sell CDs, DVDs and other items without charging value added tax has been challenged this week by Members of Parliament in the Treasury select committee.

According to the Daily Telegraph, around 100 British retail giants, such as Tesco and Amazon, have set up operations in Jersey which allow them to sell goods priced under £18 on the UK mainland free of VAT, under a twenty-year-old European law.

The fact that the exemption was initially brought in to help small firms rather than large retail groups generated an angry response from some MPs, who questioned John Healey, the Government minister responsible for overseeing the newly merged HM Revenue & Customs, over the issue at a meeting of the select committee yesterday.

"Tesco cannot be a small business," Michael Fallon, chairman of the Treasury Sub-Committee, told the Telegraph.

"The Treasury needs to wake up: significant tax revenue is being lost,” he added.

Meanwhile, Norman Lamb, another member of the Sub-Committee branded the exemption a “ludicrous loophole” and demanded its closure.

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