UPDATED: HMV.co.uk Lobbies Guernsey Over Tax Review’s Online Sales ‘Threat’

Updated: HMV’s website sales grew 100 percent year-on-year, helping sales up 5.8 percent in the 18 weeks to September 1, the retailer announced in earnings today. Numbers were also bumped up by strong sales of the latest Harry Potter book. (Release | Financials).

Original post: It could get more difficult for British online mail order companies to operate from Guernsey if a proposal to scrap a tax exemption is accepted. In recent years, HMV.co.uk and Virgin Megastores have opened distribution centres on the Channel Island, which is outside the EU and has no VAT of its own, to benefit from rules allowing them to ship orders under £18 to the UK tax-free. But Guernsey has been coming under pressure from the UK government, which reckons that means revenue lost from the British economy, so the island’s government has asked its Office of Utility Regulation to investigate the likely effects of scrapping the exemption.

NMA reckons the effect is a “serious threat” to HMV.co.uk’s online CD, DVD and game sales. HMV full-year profits to end of April collapsed from £98.2 million to £48.1 million on falling physical sales so the high street retailer is upping its online activity with a stronger web store, a social network and DRM-free downloads. Still, even online sales would likely constitute an export. HMV tells NMA it will “contribute” to the inquiry, which is due to complete this year. More detail in the original report from ThisIsGuernsey.