Apple has roundly denied reports it intends setting up business on Channel Island Guernsey in order to exploit a tax loophole when selling tracks through iTunes.

Basing its music business there would enable Apple to sell music VAT-free to British consumers, the Telegraph reports.

Apple isn't unique in choosing to explore the tax advantages of doing business from the island: Tesco, Asda, HMV, Amazon and Woolworths have all set up delivery mechanisms there.

They all benefit from a unique law which allows retailers outside the EU to sell goods worth less than £17 to UK consumers free from VAT, the report explains. This leads to significant benefits both for the businesses concerned and also consumers, who get the same products at a better price.

There is some pressure to end the tax loophole.