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Last Updated: Friday, 22 July, 2005, 12:07 GMT 13:07 UK
New moves to close VAT loophole
Compact disc
The proposals mean firms will need a licence to operate in the island
Jersey is to change the rules that allow companies to exploit a tax loophole, which enables them to sell products by mail-order without VAT.

The Economic Development Committee has announced plans that it said will control the growth of internet mail order companies based in the UK.

Now any UK-based firm operating part of its internet or mail order business through Jersey will require a licence.

The committee said island-based firms will also require a licence.

Economic benefit

Under European law, retailers that operate outside the EU can sell products valued at less than 18 to customers in member states without charging VAT.

Many UK businesses have taken advantage of the boom in internet shopping and are operating from Jersey.

The committee says its new policy aims to maximise the economic benefit to Jersey-based internet and mail order businesses.

It says it will also limit the growth in the activities of UK-based companies which channel sales of CDs and DVDs through Jersey.

During a UK parliamentary debate in February it was stated that the Treasury is currently losing 80m a year from retailers operating "offshore" and that could soon reach 200m a year.

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