VATF36220 - What to consider prior to determining whether to use an intervention: matters to consider when looking at particular types of taxable person or activity: box breaking and box consolidation: what is 'box breaking' and 鈥榖ox consolidation鈥�?
Box breaking
Simply put, box breaking is the purchase of handsets 鈥榣ocked鈥� into particular networks from retail outlets (supermarkets, stores or network retail shops) in the UK, which are then 鈥榰nlocked鈥� so that they can be used on any network. These unlocked phones are then sold, at a profit, to entities within countries where there are little or no subsidies. When a box breaker purchases 鈥榣ocked鈥� phones with the intention of unlocking them and selling them at a profit, the retailer and network provider lose money. This is because phones purchased in the UK that are not 鈥榣ocked鈥� to a network cost more than those that are.
Although the unlocking of the phones by the box breaker may breach the supplier鈥檚/manufacturer鈥檚 terms of sale, it is not an illegal activity.
Box breaking on a large scale can require a substantial number of individuals to buy and reconfigure the handsets (鈥榬unners鈥�). These individuals might be employees, agents, friends, family etc (VATF36232). In addition, extensive warehousing or storage facilities will be required. The most significant cost of the box breaking operation is the purchase of the phones. Other costs include reconfiguring the handset for the intended customer market, handling stock, working capital and shipping.
Box consolidation
Box consolidators work in much the same way as box breakers, except the mobile phones purchased are not locked into any network (usually described as 鈥榮im free鈥�). Again, they use 鈥榬unners鈥� to make individual purchases of mobile phones from retail outlets, sometimes up to a hundred purchases from one retail store, and then 鈥榗onsolidate鈥� those purchases for onward sale.
Method of payment
It is usual for box breakers and box consolidators to pay for the mobile phones in cash or using gift cards rather than bank transfers, credit or debit cards. It is also usual to find them being paid in cash by their customers.
When visiting a taxable person involved in box breaking or box consolidation you should consider the issues set out in VATF36230.