Businesses that sell UK product through their Jersey operation have lost their licence to sell tax-free games of under £18 – a practice that costs the Treasury around £90 million per year.
But other web companies look set to follow Tesco Online and set up a non-EU base – where they can continue to benefit from avoiding the usual 17.5 per cent VAT charge.
Amazon has already told MCV that it is investigating new territories for its headquarters, with a spokesperson confirming the company is “evaluating its options”.
Forum For Private Business spokesperson Matt Hardman commented: “Online entertainment businesses based in Jersey will all now look to move to somewhere else like Zurich to escape VAT.
“These areas are outside the EU, but are still cost-effective to import goods from. This supposed Government crackdown on the Jersey loophole just means that companies will have to move their operations.”
The news comes after Tesco Online announced that it was moving its CD, DVD and games operation out of Jersey to a new VAT-free supply centre in Zurich, Switzerland.
Asda Online and Play.com also operate from Jersey, and while question marks still hang over Asda Online’s future, Play insists that it is staying put.
“We are certainly not looking to follow Tesco’s lead,” head of games at Play Gian Luzio told MCV.