Tesco moves CD sales to Switzerland

Tesco is to move its cut-price CD and DVD sales business to Switzerland, the supermarket chain has said.

It currently sells discs at prices that undercut those offered by most UK stores, because the items are dispatched from a facility in Jersey and so are not subject to British Vat rates.

Jersey has no Vat, meaning individually posted items that cost less than £18 could be shipped to the mainland without attracting the tax. The loophole in the law that allowed this practice has now been closed, which forced Tesco to move its distribution facility to Switzerland.

Switzerland is not part of the European Union, which means that the company can continue to sell cheap music CDs, DVDs and computer games without having to charge Vat. A representative of Tesco told trade publication MCV: "Following changes in local legislation and so that we can continue to offer these great prices to our customers, the operation is now based in Switzerland."

Retailers on the mainland are forced to charge Vat at 17.5 per cent of the price on all such purchases. Last year, more than 100 shops petitioned the government to change the law, saying that it posed a threat to small businesses.

Tesco is not the only company to have been based in the Channel Islands. Asda and Amazon also sell some products from the region, allowing them to avoid levying Vat.