UK Govt. to review airport VAT-free sales

UK Chancellor George Osborne has announced a review into airside VAT-free shopping in the UK “to make sure savings are being passed on to shoppers”.

The UK Government has announced a review into VAT-free airport retailing

In a statement, the Government claims that some airside retailers are keeping up to an estimated 50p of every £1 of potential VAT savings, instead of passing the benefit on to shoppers.

HMRC, the revenue and customs department, has been tasked with reviewing airside shopping taxation and VAT relief.

The review follows intense UK media coverage in the summer of 2015, when a number of newspapers investigated airport retailer practice of asking for boarding cards at till point.

The Independent’s Oliver Wright branded it a “scam” that, if the traveller is departing the EU, retailers are “taking the 20% VAT saving for themselves”.

Most UK retailers say they pass the savings on to the consumer. Boots, WHSmith and Dixons Travel have been identified as not passing on savings. However the ambiguity of some reports has led to a consumer backlash against wider airport retail on social media.

Osborne said: “For families flying out of the UK for a winter getaway, airports should be the ideal place to pick-up a bargain. VAT relief at airports is intended to cut prices for those travellers – not be a windfall gain for shops.

“But many people could be paying over the odds for their purchases because the Government’s VAT concession isn’t passed on.

“This is simply unacceptable. I have launched a review to make sure that this VAT relief benefits those it’s intended for – consumers – whatever time of the year they are travelling.

“This review will consider ways to ensure prices reflect VAT savings as well as savings on duty.”

In response the UK Travel Retail Forum (UKTRF), which represents most sectors of the travel retail business including spirits producers, has released a statement “welcoming the opportunity” to highlight the importance of airport retail:

“Shopping has become a much-loved part of travelling through UK airports which lead the world in offering choice and value to passengers. We welcome the opportunity to show HMRC the value that we offer to consumers and to demonstrate how airport retail generates vital revenue to underpin and sustain the success of British airports.

“UKTRF welcomes the opportunity to contribute to the review and to clarify with HMRC how the rules on VAT on sales to travellers are applied.”

The Government’s review is due for completion in early 2016.