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Government To Close Vat 'loophole': Dvd's, Games, Misic To Go Up In Price

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url]http://www.dailymail.co.uk/news/article-1362308/George-Osborne-change-VAT-rules-DVD-price-rise-cost-shoppers-130m.html?ito=feeds-newsxml[/url]

DVD prices to rise as VAT rules tightened in budget move that will cost shoppers £130m

A sales tax loophole used by millions of Britons to buy cheap CDs, DVDs, computer games and even contact lenses from the Channel Islands is to be closed.

Chancellor George Osborne is expected to change VAT rules in a move that will cost shoppers at least £130million a year.

Currently, high street retailers like Tesco, Asda, Sainsbury's, Boots and Specsavers use internet stores based in the Channel Islands to offer VAT-free prices.

Amazon and other fast-growing internet specialists, such as Play.com and TheHut.com, use the same ploy.

The decision to close the VAT loophole could add £2.80 to the price of a blockbuster DVD such as Inception, taking it up to £16.76. A chart CD, such as Rihanna's Loud, could go up by around £1.80 to around £10.80.

Under the current law, low value items costing less than £18 can be imported to the UK and from locations outside the EU - such as the Channel Islands - without carrying VAT.

The arrangement was condemned by small independent chains and others for many years, amid claims it was robbing sales from the high street.

Critics claim the VAT-free deal led to the closure of hundreds of stores and fuelled the difficulties of chains such as HMV, which has recently issued a number of profit warnings.

The last Labour government rejected repeated calls to change the VAT rules, insisting it was not a loophole.

However, it appears the Coalition is determined to put an end to the VAT-free purchases in the latest effort to boost income and cut spending to tame the national debt.

The Chancellor criticised the system when in Opposition and he is expected to ban it in his budget later this month.

Treasury minister Lord Sassoon signalled the plan, telling the Lords: 'We are committed to tackling tax avoidance and, in that context, we hope to be in a position to announce possible changes to the operation of LVCR (low-value consignment relief) in the budget.'

He said that, in contrast to the Labour government, which had been reviewing the VAT rules since 2006, the new administration had 'immediately gripped the situation'.

Tesco said: 'To date all the savings that are made on buying items, such as DVDs and CDs, from our Guernsey business have been passed on to consumers. Consumers have been the winner, we don't make any money from this arrangement.

'Our concern all along has been that there should be a level playing field for everyone selling these products. For that reason we are prepared to go along with the government's plans.'

The Forum of Private Business, which has been campaiging for many years for an end to the VAT loophole, welcomed the expected change.

Spokesman, Chris Gorman, said: 'It appears the government has finally seen sense of this. It has been hugely unfair having a tax loophole that could only be exploited by big multi-national businesses to the detriment of tiny little high street traders.

'We are very glad that government has finally recognised what a big issue this is.

'There has been a feeling among many small businesses, particularly record shops and others selling low value items that they have been really unfairly treated.'

all this will do i fear it will push more people to download their media requirements illegally, it will also hurt the internet business that use this to their advantage

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What about companies that operate in the UK that pay hardly any corporation tax or do double Irish? If we're going to close one loophole, let's close the lot!

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How big of Tesco to be prepared to go along with the government's plans, eh? <_<

...implying they only followed the off-shore trend to protect their market share ....seems sensible as the Government of the day Labour stood back and allowed large and small firms to collapse ....I used to buy CDs and DVDs in Woolies ....they didn't stand a chance thanks to Gordo and his crew ....jobs lost never to return.... <_<

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Rip off Britain / Europe at it again.

Remember a few years back when you could buy a CD from Hong Kong for about £4 (can't remember the name of the most popular website), then the EU ruled it was illegal and made those sites add an additional fee to level the playing field.

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Rip off Britain / Europe at it again.

Remember a few years back when you could buy a CD from Hong Kong for about £4 (can't remember the name of the most popular website), then the EU ruled it was illegal and made those sites add an additional fee to level the playing field.

CD WOW

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CD WOW

The most clear case of the government BACKING price fixing I've ever seen. People used to complain about CD prices...the government was bloody helping them by ruling in favour of them when someone tried to sell legit CDs.

As someone else said, please do raise VAT, music and film makers have WAY too many powers under copyright.

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Good. The delivery times of the Channel Island based companies are always slow anyway so I don't mind paying the extra for something posted on the mainland.

I'd prefer to keep the money from these purchases within the UK as well rather than in the hands of some tax avoiding 'businessperson' whose living only exists because of some obscure edge case of tax regulation/law.

Arguments about 'the man' profiteering off the back of the hard work of musicians / writers etc. is neither here nor there as they do that wherever you buy it from.

Edited by efdemin

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Just download more , screw the pricks don't give them another penny.

That was my first thought too. Tee hee!

Good. The delivery times of the Channel Island based companies are always slow anyway so I don't mind paying the extra for something posted on the mainland.

If it's a choice between waiting or paying more tax to the government, I could happily wait weeks.

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...implying they only followed the off-shore trend to protect their market share ....seems sensible as the Government of the day Labour stood back and allowed large and small firms to collapse ....I used to buy CDs and DVDs in Woolies ....they didn't stand a chance thanks to Gordo and his crew ....jobs lost never to return.... <_<

Well my point was more that they implied that there might be a situation where they would somehow break the law if new rules were applied, or that they were so powerful that they wouldn't let those rules be introduced, had they the mind to do it.

They obviously think that they run a bank!*

*Actually, they do have a bank, although I think it is more whitelabelling from other companies.

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Just download more , screw the pricks don't give them another penny.

Yep, the loss of the opportunity to purchase cheap CD's and DVD's isn't really a big blow if you can get them for free anyway.

Just a shame that the odd tenner here and there that used to go on these thing is now sucked up at the petrol pump instead!

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What about companies that operate in the UK that pay hardly any corporation tax or do double Irish? If we're going to close one loophole, let's close the lot!

100% agree with that one.

However, if they closed the UK corporation loopholes, which is billions and billions, that is going to affect the big guys, so that's not going to happen. Screw the little guy who saves a couple of quid on a DVD!

Edited by Take Me Back To London!

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Goodnight HMV

HMV prices are insane anyway.

Recently on Hot UK Deals they had the complete Twin Peaks gold edition for £18. Last time I'd checked it was around £45/£50.

Just for laughs, on one of my rare trips into town, I had a look to see what HMV were selling it for.

Series 1 -- £50

Series 2 -- £60.

So instead of £18 for both series, they were expecting me to fork out £110?

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Just download more , screw the pricks don't give them another penny.

Oh yes

WDTV for all your blueray rips, JTAG for your XBOX 360 needs,Kneaw 3.55 CFW for all your PS3 needs, lots of external hard disk space of course,these modern day rips do take up lots of space. All interconnected with Samsung 40" LCD,amp and 5,1 speakers. Even my internet connection is gratis......... :lol:

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HMV prices are insane anyway.

Recently on Hot UK Deals they had the complete Twin Peaks gold edition for £18. Last time I'd checked it was around £45/£50.

Just for laughs, on one of my rare trips into town, I had a look to see what HMV were selling it for.

Series 1 -- £50

Series 2 -- £60.

So instead of £18 for both series, they were expecting me to fork out £110?

yep, they are dead in the water imo.

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Unless they're prepared to end the system whereby sub-£18 purchases are free of import duty and VAT, the likes of Amazon will simply start to sell region 2 DVDs from bases outside the EU. I've been buying DVDs (and more recently, BDs) direct from their US site for ages; though up until now, mainly of titles that aren't available in region 2 versions. If the price of amazon.co.uk titles start to exceed that of the .com ones, then I'll simply switch to the latter.

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Government says it loses £130million.

What really is happening is that the people now have 130 million more in their pockets to spend...

Except that the government knows best and will spend the 130 million more wisely.

Agree or we'll break your legs.....

Roll on Injinworld.

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Unless they're prepared to end the system whereby sub-£18 purchases are free of import duty and VAT, the likes of Amazon will simply start to sell region 2 DVDs from bases outside the EU. I've been buying DVDs (and more recently, BDs) direct from their US site for ages; though up until now, mainly of titles that aren't available in region 2 versions. If the price of amazon.co.uk titles start to exceed that of the .com ones, then I'll simply switch to the latter.

This is the bit that is puzzling me. How can they close this loophole without charging VAT on all items less than £18? This would be a nightmare, and probably cost much more than the VAT received. Are they going to force the Channel Islands to collect VAT for them (can they do that?) Unless they start charging VAT on every import, then these guys will just move further offshore.

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Rip off Britain / Europe at it again.

Remember a few years back when you could buy a CD from Hong Kong for about £4 (can't remember the name of the most popular website), then the EU ruled it was illegal and made those sites add an additional fee to level the playing field.

Globalism is great - for the business elite. Just move your production where you want with no restraints....

For us consumers, no way can you be allowed to source your purchases globally.

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This is the bit that is puzzling me. How can they close this loophole without charging VAT on all items less than £18? This would be a nightmare, and probably cost much more than the VAT received. Are they going to force the Channel Islands to collect VAT for them (can they do that?) Unless they start charging VAT on every import, then these guys will just move further offshore.

As long as they get the majority it'll work. Play.com, Tesco's Channel Island operation etc. are big enough to be able to monitor easily. (They are also big enough to skew the host market back on the mainland which is why it's now a problem.)

There will always be small-scale avoidance but as you say it's probably too expensive to monitor.

Moving further offshore increases the delivery costs and then it's no longer a viable business. Apart from the Channel Islands, where else could you base yourself that doesn't require (expensive) air freight?

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