A UK-based company trading out of Guernsey to exploit the VAT exemption ruling has bought the Zavvi brand.

Fast growing online retailer The Hut Group is relaunching zavvi.co.uk, reportedly shipping CDs, DVDs and games from the island and books, perfume and lingerie from the UK mainland

Companies exploiting the VAT-free status on goods under £18 shipped to the UK from the Channel Islands have attracted increasing condemnation from MPs who see it as hitting the UK high street.

The European Commission has been called in to investigate and the local authorities are working to appease the UK on the issue.

The Guardian has reported thatTheHut.com already provides services from its Guernsey warehouse for UK internet customers of Tesco, Asda, Dixons and WH Smith but is keen to build its own online brand.

The Hut Group was unable to respond yesterday on the extent of its operation in Guernsey.

Jersey has used business licensing laws to push out online retailers not indigenous to the island, including Tesco, but it now appears some have returned legitimately using agent companies with operations in the Channel Islands.

A Commerce and Employment Department spokesman confirmed yesterday that The Hut was UK-based, but has a Jersey-registered entity that trades through Guernsey.