The UK Treasury has waded into the row over airport shops charging customers VAT and then keeping it themselves. Minister David Gauke says that as airside shops do not have to pay VAT on sales to the Treasury they should pass the savings on to customers.
Passengers flying outside the European Union and buying products such as suntan lotion or electronic products like Kindles are exempted from paying VAT on them. Outlets of shops such as Boots, Dixons and WH Smith located in airports charge similar prices to their High Street stores.
The retailers operate the scam by asking passengers for their boarding passes even though they have no legal right to do so. Shops then use the information obtained from the boarding cards to avoid paying the VAT on sales to customers who are flying to destinations outside the EU.
This practice means the airport shops make an extra 20 per cent profit on every single sale to passengers taking intercontinental flights. Minister Gauke stressed that VAT exemption for international travellers was to keep prices low for them and not designed as a bonanza for retailers.
Travellers leaving the UK since the story broke say they have seen many airport store customers refusing to produce boarding cards when making purchases. Not every airside retailer adds VAT to purchases with Harrods confirming that articles sold at its five Heathrow Airport outlets were in fact tax free.
Defending its policy of requesting to see passengers’ boarding cards, a WH Smith spokesperson said books and magazines were duty free anyway, but did admit to not paying VAT on other items. Dixons justified its non-payment of the tax by claiming its products were excellent value and came with one standard price across the board.