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Online retailers, including Amazon, Tesco, and W H Smith, using a Channel Islands VAT loophole as a way of dodging millions of pounds of tax on the sale of CDs and DVDs are facing a crackdown, according to a leaked Treasury letter seen by the Observer.
Previously, ministers have insisted online retailers' exploitation of VAT relief on imported goods sold for less than £18 was "not a loophole", though the practice - particularly as it related to CDs and DVDs - was "under review".
Leaked letters from Treasury minister Stephen Timms reveal the government now privately believes British companies marketing goods sourced in the UK to UK customers at VAT-free prices may be "abusing" rules.