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HMV relocates mail-order operations from Guernsey to Birmingham

By | Published on Monday 26 March 2012


HMV has confirmed it will close its mail-order fulfilment warehouse in Guernsey putting 46 jobs on the line. The decision comes just days before the UK government closes the tax loophole that means mail-order operations based on the Channel Islands do not have to charge VAT on products under £15, giving online CD and DVD sellers who send stock to British customers via Jersey or Guernsey a 20% advantage over mainland competitors.

As much previously reported, independent retailers who could never afford to set up mail-order ventures based offshore have long complained about the unfair advantage the so called Low Value Consignment Relief system gives the online-only start ups and bigger retail firms who can afford to exploit the tax dodge. Many feel the prolific use of the offshore tax break by some contributed to the collapse of many independent retail firms in the UK, and it hasn’t helped the flagging HMV much either.

Because while HMV decided to join the LVCR party in 2005 – insisting it did so reluctantly just to compete – arguably by that point it had already lost out in terms of the online CD sales market to the likes of And despite also being able to capitalise on the tax break in recent years, HMV has struggled to compete with its newer upstart competitors in mail-order, while its high street stores suffered big time from the plethora of cheaper stock available via the web.

As previously reported, earlier this month the governments of Jersey and Guernsey unsuccessfully tried to block the UK from removing LVCR from the Channel Islands on the grounds doing so was discriminatory.

They argued that because other non-EU countries would still benefit from LVCR, mail-order firms currently based in the English Channel would move to other tax efficient locations such as Switzerland, so the UK would not be better off, while Jersey and Guernsey would see unemployment rates shoot up. This was a concern also recently expressed by HMV boss Simon Fox, though his company will now relocate all its mail-order operations to a facility in Birmingham, with a statement noting the efficiencies that can be achieved by having all the firm’s distribution operations in one place.

Those who have campaigned against the Channel Islands tax dodge argue that no other non-EU country is so logistically convenient for mail-order sales into the UK as Jersey and Guernsey, and that anyway, if all the mail-order firms move en masse to, say, Switzerland, there’ll be an obligation on the UK government to end the relief system there too.

Of course all the mail-order companies and big retailers now expected to depart the Channel Islands do so after years of insisting they based themselves in the English Channel for reasons other than the tax breaks. HMV themselves insisted in 2005 that the VAT benefits were “just one aspect” of their decision to relocate their mail-order operations into the Channel, resulting in many redundancies back on the mainland, and that “the support businesses get in Guernsey is equally important”.