UK airport VAT relief review

Thu 31st Dec 2015

The UK’s Chancellor, George Osborne, has announced a review into the VAT and excise duty charges on goods purchased at UK airports by passengers departing the European Union.

It emerged in August this year that airside retailers were lawfully not passing on VAT discounts on purchases by passengers who were leaving the EU. Such expenditure on goods is regarded as an export, and therefore not subject to VAT under an extra statutory provision granted in the 1990’s at the time of the withdrawal of duty freeshopping in the EU.

Retailers have been collecting proof of EU departures by recording passengers’ boarding pass at tills.  This enabled them to retain the implied VAT element from the UK tax authorities. Passengers had believed this was only for marketing purposes.

On 31 December, the UK confirmed it will be reviewing the whole regime with a view to pushing retails to reduce their pricing for EU-departing passengers.  The review will be completed in early 2016.

Retailers are not obliged to pass on the VAT saving, and any change may require an adjustment in the law.  Retailers may be encouraged to calculate a VAT discount at the checkout till once it has been demonstrated that a passenger is leaving the EU.  However, the government is unlikely to be able to to force the retailers to reduce their prices to reflect the VAT not collected.

Newspapers and books are nil rated for UK VAT in all situations.