UK govt singles out alcohol and tobacco to go duty free

Alcohol and tobacco products would be available for UK travellers to the EU to buy duty free following a no-deal Brexit, UK chancellor Sajid Javid has announced.

Alcohol and tobacco have been singled out for a return of duty-free shopping between the UK and EU

UK travellers to the EU would be able to purchase beer, wine, spirits and tobacco without paying UK excise duties under the Treasury’s plans. Javid said this would make a bottle of wine bought in Heathrow £2.23 (US$2.75) cheaper.

Travellers returning to the UK from the EU would have the option to bring home unlimited quantities of alcohol and cigarettes – as is the case now – or purchase a limited amount duty free from shops in Europe instead.

“As we prepare to leave the EU, I’m pleased to be able to back British travellers,” said Javid. “We want people to enjoy their hard-earned holidays and this decision will help holidaymakers’ cash go that little bit further.”

The UK Government will launch a consultation on its long-term duty free policy.

Ireland to reciprocate

In response, Ireland’s minister for finance and public expenditure and reform, Paschal Donohoe, said Ireland would “reciprocate” the policy, and introduce duty-free alcohol and tobacco sales for travellers from Ireland to the UK. The sales would be “subject to quantitative purchase limits”.

However, Donohoe outruled the introduction of duty-free shopping between the Republic of Ireland and Northern Ireland.

“The effect of the announcement by the UK Government today on the return of duty-free shopping between the UK and EU Member States means that Ireland in respecting our international obligations will, as intended, reciprocate the UK Government’s decision and facilitate duty-free purchases for passengers travelling from Ireland to UK ports and airports,” said Donohoe.

“Passengers to Ireland purchasing duty-free goods in the UK must adhere to the personal consumption limits set out in EU law.”

The European Travel Retail Confederation (ETRC) recently said it had received assurances from Brussels that in the event of a hard Brexit (where the UK would leave the EU’s single market), duty- and tax-free sales to UK-bound passengers would be permissible from 1 November.

No-deal stipulation

UK prime minister Boris Johnson has held firm on his plan for Britain to leave the EU on 31 October, with or without a deal.

Under current government plans, the return of duty-free shopping between the UK and EU will only apply if there is no deal for the divorce.

According to the withdrawal agreement previously negotiated by Theresa May, and rejected by MPs, the UK would stay in the single market and customs union for a transition period, meaning duty-free shopping could not immediately return.

Duty-free shopping between the UK and EU stopped in 1999 with the creation of the single market, and the travel retail industry has long promoted the benefits of the return of duty free.

Trade body the UK Travel Retail Forum (UKTRF) welcomed the Treasury’s announcement.

“The industry has been campaigning for fair and sensible changes to the UK’s duty free structure for an extended period of time, and it is pleasing to see the government provide the certainty our industry needs to prepare for a no-deal Brexit,” said Francois Bourienne, chair of the UKTRF.

Alcohol and tobacco singled out

However, the association said it is “very concerned” that the government has declined to remove VAT from other product types sold in airports.

“With the EU already clearly signalling its intention to remove duty and tax from all airside products in the event of a no-deal Brexit, UK airports and retailers will be put at an immediate and significant competitive disadvantage against European competitors,” added Bourienne.

According to the UKTRF, independent economic analysis has shown that the duty-free sector could contribute up to £900 million (US1.1 billion) to the UK economy after Brexit and generate approximately 9,300 new jobs.

The Spirits Business explores the travel market for spirits in depth in our upcoming September 2019 issue, out soon.