Airport shops urged to pass VAT savings on to customers

Passenger holding a boarding pass Image copyright Thinkstock

Airport shops are being urged to pass on VAT savings made in some cases when customers show boarding passes.

Passengers are asked to show passes so retailers can identify who is flying to non-EU countries and avoid paying 20% VAT on customers' purchases.

Treasury minister David Gauke said VAT relief at airports was intended to reduce prices for travellers, not be a windfall gain for shops.

Retailers said they followed government rules.

The Independent newspaper has claimed that thousands of people are now refusing to show their boarding passes as part of a "grassroots rebellion".

Customers are not legally obliged to show their passes when buying goods at the airport, except when buying cigarettes or alcohol in a duty free shop.

The newspaper's travel editor, Simon Calder, told BBC Radio 5 live: "If you take a £6 bottle of sun cream the VAT element is £1.

"So if you fly to Greece, the retailer pays that to the government, if you fly to Turkey and the retailer can find out, then it goes straight into their pockets - nothing illegal about it at all but I will always challenge it."

He said "all kinds of stories" had been given by retailers to explain why passengers should show their boarding passes, including that it is for security reasons, which he said is "complete tosh".

Airport shopping: What are the rules?

Who is entitled to VAT savings?

Anyone travelling outside the 28 countries of the European Union (EU). Travellers within the EU or the UK have to pay existing rates of duty and VAT.

Do you have to show a boarding pass?

If you are buying cigarettes or alcohol in a duty free shop, you are legally obliged to show your boarding pass, to prove you are travelling outside the EU. If you are buying other goods - say books, snacks or cosmetics - you are not obliged to show your pass.

Read more from the BBC's personal finance reporter Brian Milligan

Mr Calder added staff were told to ask to see boarding passes even for goods where no VAT is paid, such as books or magazines.

Money Saving Expert founder Martin Lewis told BBC Radio 2's Jeremy Vine programme travellers withholding their passes would force companies to "take note and eventually take action".

"You're not protecting the sanctity of Britain by giving them your boarding pass, you are enabling the commercial company to get a reduction on its tax bill," he said.

Labour's shadow transport minister Gordon Marsden said it was "simply unacceptable" that some retailers were "taking advantage of this relief" and said the government needed to ensure customers were being treated "fairly".

A number of retailers have responded to the criticism:

  • Boots said the company claimed back some VAT for non-EU passengers in accordance with government rules
  • WH Smith said it would be impossible to have a pricing system which distinguished between travellers to EU and non-EU destinations
  • Dixons asks customers to show boarding passes when making purchases but says this is only a request and has reissued this guidance to staff. If some of its products, such as laptops, are found cheaper elsewhere it will pay customers double the difference, it says
  • John Lewis said it did not charge VAT and clearly labelled the price difference
  • Next offers VAT-free prices on all its goods and pays the VAT itself when people are not entitled to the discount
  • A Harrods spokesman said its airport stores sell all their products VAT free
  • World Duty Free Group said in its case it was a legal requirement, specified by HM Revenue and Customs (HMRC), to ask all its customers to show their boarding passes. It said it uses the information to ensure any applicable customs, excise duty and VAT is fully accounted for and that it does not allow it to reclaim any tax from HMRC

'Extraordinarily rude'

Jo Evans reminded travellers retail workers like her did not make the rules, tweeting: @Gatwick_Airport spare a thought for us retail workers when arguing about showing boarding passes to buy something, we don't make the rules!

Earlier this year, BBC Radio 4 listener David Owen questioned why he had to show his boarding pass at airport shops.

His views have been echoed by other passengers.

James Mitchell, from London, said he tried to refuse to show his boarding pass when buying sunglasses from Harrods in June but was told by a shop manager that it was "mandatory".

Sandra Leaton Gray said she had often been treated "extraordinarily rudely" for not showing her boarding pass and was told it was for legal and security reasons.

Jo Barnett, from Sittingbourne in Kent, said: "We questioned why we were being asked to show our boarding card while at Gatwick.

"The man told us he didn't know, but he could not process the sale without scanning the boarding pass."

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