HMV is to offer VAT-free games via instore kiosks, under a new initiative called HMV Delivers.

This is an attempt to extend the VAT-avoidance scheme used by the company's website, not to mention many other online retailers, that means games, CDs and DVDs can be sold minus the 17.5% charged on items by the UK Treasury.

The loophole they use is VAT exemption for products under £18 that are imported into the UK from outside the EU.

HMV has said that the products that will be sold via these instore kiosks will be restricted to products not available in store on the shelves.

A spokesperson said this will "remain a convenient, but very marginal channel for customers and sales," and that the main function of the terminals in the future would be to offer digital downloads.

HMV has said that its VAT-free sales for the last financial year were around GBP 50 million, which would amount to a loss to the Treasury of GBP 8.75 million.

It added: "Our instore HMV Delivers service currently enables customers to place an order at the sales counter for a title that may be out of stock direct from our Internet fulfilment centre. We provide this as a service to our customers, and it represents a negligible part of our overall sales.

"Had the value of these orders been subject to VAT last year, the VAT amount would only have been approximately £140,000. We expect this to remain an extremely marginal channel for sales, as the kiosks we are introducing will be to drive sales of fast growing digital downloads."