Amazon Faces UK Tax Clampdown - Is This The End To The 99p Download?

The UK Treasury plans to reap an extra £300 million in tax by tightening the rules on technology firms like Amazon, Apple and Google.

The Sunday Times reported today that the tax would close a VAT loophole exploited by the music giants and would be a 'threat' to the 99 pence music download.

The tax would affect the sale of digital goods including music downloads, e-books and smartphone games.

The details, released in a policy document last week, mark a step-up in the international drive to reap more cash from foreign tech companies after last year backlash against the low levels of tax paid by such firms.

The Mail on Sunday said the UK Chancellor George Osborne is working with nine other countries to draw up a plan for joint action. If it could not, the Treasury would take unilateral action against the firms, the newspaper said.

The companies save billions a year across Europe by exploiting tax gaps - mainly through offshore structures and backward tax policies which are not set up to cope with digital firms.

Apple and Amazon sell digital goods through Luxembourg, for example, which only charges a 3 per cent tax rate. The newly drafted UK rules will enforce a 20 per cent charge in line with HM Revnue & Customs VAT rules.