Matt Martin 09:14 (BST)
21/07/2008

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Entertainment retailer HMV is to begin offering VAT-free games via instore kiosks, under a new initiative called HMV Delivers.

According to a report in The Guardian, the company plans to extend the controversial VAT-avoidance scheme used by the company's website to stores across the UK, offering games, CDs, DVDs and Blu-ray movies minus the 17.5 per cent charged on items by the UK Treasury.

Many online retailers take advantage of the loophole that allows VAT exemption for products under GBP 18 that are imported into the UK from outside of the European Union.

HMV.com and Jersey-based Play.com already operate schemes to take advantage of the legal loophole originally designed to minimise the administration burden on marginal trade.

HMV has said that products on offer via the instore kiosks will be restricted to products not available on store shelves, according to the report.

A spokesperson said this will "remain a convenient, but very marginal channel for customers and sales," and that the main function of the terminals in the future would be to offer digital downloads.

HMV told The Guardian its VAT-free sales for the last financial year were around GBP 50 million, which would amount to a loss to the Treasury of GBP 8.75 million.

HMV has contacted GamesIndustry.biz to offer the following statement:

"Our instore HMV Delivers service currently enables customers to place an order at the sales counter for a title that may be out of stock direct from our Internet fulfilment centre. We provide this as a service to our customers, and it represents a negligible part of our overall sales."

"Had the value of these orders been subject to VAT last year, the VAT amount would only have been approximately £140,000. We expect this to remain an extremely marginal channel for sales, as the kiosks we are introducing will be to drive sales of fast growing digital downloads.