Public dissatisfaction is rising about prices being charged by retailers in the airside shopping malls of Britain’s international airports.
The Independent newspaper published an investigation at the weekend that exposed how retailers such as Boots, Dixons Travel and World Duty Free are failing to pass on the savings they make from the sale of goods that are exempt from VAT.
The 20% VAT rate is applied to most goods, including watches, that are bought by customers travelling to destinations within the European Union.
However, if a passenger is flying beyond the EU, the retailer can reclaim the VAT from the taxman.
A spokesman for HMRC confirmed to the newspaper that retailers do not need to pay VAT on items sold to passengers flying to destinations outside the European Union.
“Duty free shops may treat the sale of goods to passengers intending to take them to non-EU destinations as zero rated exports, provided they retain suitable evidence such as by scanning the boarding card,” he said. “There is nothing in VAT law to require the production of a boarding pass to purchase goods in airport shops, but without such evidence the supply cannot be zero-rated as an export,” the newspaper was told.
Shops in international airports ask to scan passengers’ boarding passes to prove they are flying to destinations outside the EU. This scan is used as evidence to reclaim the VAT.
The Independent’s investigation found that there was little or no difference in the prices offered at airports compared to the same products being sold on the high street or online.
Mobile phones, cosmetics and electronic goods were all shown to be selling at similar prices, despite the retailer being able to reclaim 20% from items sold to people travelling to destinations outside the EU.
WatchPro has compared prices for big brand watches sold by World Duty Free to prices for the same watches sold online and on the high street.
A Michael Kors Skylar Green & Gold Tone Watch was listed on World Duty Free’s web site for £215.80 today (Wednesday). It can reclaim VAT of £43.16. Laings of Glasgow is able to sell the watch for £181.30, despite needing to pay VAT in full.
World Duty Free compares more favourably for a Vivienne Westwood Westmister Unisex Watch, which it sells for £333.33. Goldsmiths has the same watch on sale for £400. Beaverbrooks and Ernest Jones sell it for £375.
There is no suggestion this practice is illegal, but consumer champions are pressuring retailers to be more open. “We are inclined to be compliant [when asked to show our boarding passes in airports], and retailers have been taking advantage of this,” said travel expert Simon Calder.
A government Treasury spokesman has also suggested airport retailers to pass on the benefits for the VAT exemption.
A campaign is mushrooming that encourages passengers to refuse to show their boarding passes in airport shops, which would make it more difficult for the businesses to reclaim VAT.
Martin Lewis, founder of MoneySavingExpert.com, says retailers will only start listening when they start to lose money.