DCC's online retailing arm looks set to be hit by an imminent tax crackdown on companies selling VAT-free CDs and DVDs to British shoppers from the Channel Islands using an offshore tax loophole.

The Irish conglomerate owns sendit.com, one of the longest-established online DVD retailers, which uses British company The Hut to ship CDs, DVDs and games from Guernsey.

The British Treasury estimates that it is losing over €125m per year as a result of the loophole and leaked letters published in the press indicate that the treasury minister Stephen Timms has now ordered a clampdown on companies using it.

The Hut, which also has outsourcing deals with Tesco, Asda, Argos and WH Smith, is likely to be among the companies targeted. The loophole involves the use of a rule designed to allow the VAT-free shipping of small items from the Channel Islands to Britain. Without this relief, all goods sent between them would be liable for excise duty because the Channel Islands are not part of the EU.

A spokesman for DCC declined to comment on what impact a clampdown could have on sendit.com.