Following revelations in the media last year that airport shop operators weren’t passing on VAT savings to customers people power has had some real effect.
Many passengers on becoming aware that it isn’t a legal requirement to show a boarding pass in an airport shop have been refusing to do so. The reason that the retailers want to see boarding passes is so that they can identify passengers flying within and beyond the EU. The retailers were then using this information to make a 20% tax-saving profit on purchases made by people flying outside the EU, rather than pass the reductions onto the customer. Most customers were assuming that the savings were being passed on in full when in fact they weren’t.
With the introduction of a new industry code airport retailers will have to:
- Provide a clear explanation to all customers on how the VAT benefit is used and on when and why customers are required to present boarding passes. This is likely to be done through improved airport shop signage and on retailers’ websites
- Report to the UK Travel Retail Forum on how they implement the Code
The Code does though state that passengers may still have to show their boarding passes to benefit from any savings available to ‘identify qualifying sales’.
Going forward passengers who are shopping at airports won’t have to show their boarding pass in general retail shops such as newsagents and chemists. However they will still need to show their boarding pass in Duty Free Shops as those retailers are legally bound to scan customers’ boarding passes – even if those customers are not buying tobacco or alcohol.
Whilst the new Code addresses the issue under the current circumstances, the big question is what will happen post Brexit when Britain leaves the EU? After this date logic says that even more travellers should be subject to VAT refunds on their purchases. However, before then the Treasury is expected to publish a long-awaited report on airport VAT after it emerged retailers were pocketing these refunds that should have been passed on to their customers.
A full list of participating airport retailers is available on the Airport Operators Association website.
If you’d like to read more of our VAT themed blogs take a look here.
