Play.com shutters retail business; cites tax loophole closure

Retailer Play.com will shut its retail business after the U.K. government closed a tax loophole last year. Will other businesses follow suit if the price of selling goods goes up?
Written by Zack Whittaker, Contributor

Online retailer Play.com will close its retail store business and become an online marketplace from March.

The Jersey-based company, where the rate of tax is much lower, told ZDNet that the closure of a tax loophole, the Low Value Consignment Relief (LVCR), in April 2012 by the U.K. government was the "determining factor" to shut its retail business.

In becoming a marketplace-only service, Play.com will allow customers to sell their items through the Web site while the company will take a cut, much like Amazon or eBay.

This means that any items sold for less than £15 ($25) will now have to pay the full amount of Value Added Tax -- like sales tax -- at the current rate of 20 percent of the item's worth.

In doing so, 147 staff will be made redundant in Jersey, and a further 67 employees will go in Cambridge and Bristol on the U.K. mainland by March. 

A source speaking to ZDNet confirmed the move earlier this morning. In a statement, the firm said: "Moving forward we are intending to focus exclusively on our successful marketplace, which is our main business area, and to phase out the direct retail part of our business."

On Twitter, the company was keen to stress that only its "direct retail business" would be closing, and that customers could still buy items from its Play Marketplace "as usual," with "more than 20 million listings."

The move by Play.com is interesting. Considering in recent weeks and months the furore by various firms alleged to have avoided paying the full amount of tax in the U.K. -- not limited to Google, Amazon, Apple and Microsoft, and Starbucks, which particularly took the brunt of the U.K.'s anger -- the closure of more loopholes could see a negative effect on U.K. operating businesses.

Exactly how this will play out will be anybody's guess. That said, if the current trend continues, we could see major businesses lobbying government in order to avoid paying the full amount of tax, or leaving U.K. shores for good.

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