Last week I wrote about how UK airports were profiteering from customers by demanding boarding passes and withholding VAT savings. The rest of the week saw the mainstream UK media going pretty wild over the boarding pass VAT topic. David Gauke, the Financial Secretary to the Treasury, even said:
The VAT relief at airports is intended to reduce prices for travellers, not as a windfall gain for shops
Well my friend was passing through Bristol airport a couple of days ago, armed with the knowledge that a boarding pass was not required at check out. When he went to World Duty Free to buy a few things, they had security guards standing behind the till handing this leaflet out:
For World Duty Free Group it is a legal requirement, specified by HMRC, to ask all passengers to show their boarding passes (stating flight number and destination) when buying all products in our airport stores. This procedure is an accepted and common practice in duty free shops around the world.
Unlike other airport stores, goods sold in duty free stores are brought onto the airport tax and duty-suspended (which means that the duty free retailer accounts for the taxes only when the product is sold to the customer). World Duty Free uses the flight destination information on the boarding pass to ensure that any applicable customs, excise duty &/or VAT is fully accounted for to HMRC. This process does not allow World Duty Free to reclaim any tax from HMRC, on the contrary it is the system agreed with HMRC that enables World Duty Free to make the correct payment to HMRC where applicable.
A copy of the regulation can be found at the following website:
This regulation is supplemented by a separate agreement between World Duty Free Group and HMRC (the Bespoke Retail Agreement Scheme) which stipulates that boarding passes must be presented when buying all products in order to enable World Duty Free to correctly account to HMRC for customs duties and VAT as appropriate.
For further information please contact:
I can imagine all the retailers have had a very embarrassing few days, especially when all the newspapers had the same “Don't show your boarding pass” type headline. But to come out belligerent and continue to tell everyone it's a legal requirement (when all other outlets had admitted it is not) warrants further investigation.
Clicking the link in their statement takes you to a very detailed page about what constitutes an “Export Shop”. It's pretty long and sets out the financial mechanisms behind payments, accounting rules and the relevant legislations.
But excise duty and VAT are totally separate taxes!!!
Say after me: Excise and VAT are different. Excise and VAT are different. Excise and VAT are different….(repeat ad nauseam)
The simple fact is World Duty Free is trying to leverage public ignorance behind the difference between Excise Duty and VAT and still luring customers into handing over their boarding passes. There is this key statement in Section 1 of the same link.
Although an export shop can also hold goods liable to customs duty and VAT, this notice deals solely with excise goods (alcohol and tobacco), and should be read in conjunction with Notice 197.
The legal rules beyond here start to go outside my expertise, so I could do with a help here! But as far as I can tell, the key questions still remain:
- Is it really a “legal requirement” to show your boarding pass if you are buying items from an “Export Shop” that are not subject to Excise Duty, but are subject to VAT?
- If you do give your boarding pass, what happens to the VAT (not excise duty) if you are flying non-EU? (My guess is they still keep it – just like the other shops)
HMRC could do us all a favour here and present a statement about the arrangement they have with World Duty Free Group to clarify the customer's position. I somehow doubt they will as it is not their general policy to comment on individual retailers, so unless someone puts in a Freedom of Information Request (which might not even be honoured) then we could be left in limbo on this one.