UK Plans to Scrap Duty Free at Airports a ‘Hammer Blow’ to the Aviation Industry

In what is being called a fresh ‘hammer blow’ to the aviation industry, the government has announced it intends to abolish duty-free sales at airports from January.

THE Airport Operators Association (AOA) has slammed the British government’s decision to scrap tax-free sales for passengers departing England, Scotland and Wales from next January. The Airport Operators Association (AOA) immediately condemned the move announced by the Treasury yesterday on September 11 by saying it “needlessly harms an industry in peril.”

The Treasury announced it will end tax-free sales at airports, ports and Eurostar stations from January 1 as the Brexit transition period ends and the government harmonises treatment of EU and non-EU travellers. Tax-free sales of goods that are not subject to customs duty are currently allowed for travellers to non-EU countries.

However, overseas retailers selling to UK-bound travellers will now benefit from a sharply boosted allowance, for Brits returning to the UK from Spain with ciggies and booze – get those suitcases ready! Duty-free sales, currently available only when travelling to non-EU countries, will be extended to travellers to and from the EU and personal duty-free allowances on alcohol will “significantly increase.”

Allowances for travellers arriving from EU and non-EU countries are three crates of beer, two cases of still wine and one case of sparkling wine – tobacco and other goods though will remain as they are now. Tax-free sales of goods not subject to customs duty are currently allowed for travellers to non-EU countries. AOA chief executive Karen Dee accused the government of “a complete lack of awareness for the jobs and businesses on the line in the aviation sector.”

The government, in its defence,  said it chose to abolish the right rather than extend it to travellers to EU states because it had “concerns over how the benefit is passed on to passengers and in some instances the relief is not consistent with international tax principles.”

VAT rebates to go

At the same time, the VAT retail export scheme which allows now-EU visitors to obtain VAT refunds on goods purchased in Britain will be withdrawn altogether from January 1. The Treasury announced: “Overseas visitors will no longer be able to obtain a VAT refund on items they buy in Britain and take home in their luggage.” It argued: “The scheme is a costly relief which does not benefit the whole of Britain equally, with current use largely centred in London.”

Retailers will still be able to offer VAT-free shopping to overseas visitors who buy items and have them delivered overseas, and this will be extended to EU visitors. Industry insiders warn that this will badly affect sales as visitors from Spain for example would surely not purchase items to have them shipped back to the country when they can just order most of it online anyway!

Thousands of jobs now at risk

Duty-free sales, currently available only when travelling to non-EU countries, will be extended to travellers to and from the EU and personal duty-free allowances on alcohol will “significantly increase.” AOA chief Karen Dee added: “Our industry can scarcely afford another hammer blow like this. By removing the airside concession, the government is needlessly harming the revenue of retailers and airports. Passengers will be dis-incentivised from making purchases as they travel.”

Dee warned: “Many foreign visitors will now choose to go elsewhere, attracted by the tax and excise regimes of our European competitors. This will harm not only UK airports but the high street stores that hugely benefit from tourists.

“I strongly urge the government to reconsider.”

The government said the rules had “to be aligned following the transition period so EU and non-EU passengers are treated equally.” Northern Ireland, however, will sit outside the new tax and duty regime for the time being while the Irish border and customs dispute between the UK and EU remains unresolved.

UK Travel Retail Forum President Francois Bourienne

Bourienne said: “The anger within the UK industry is palpable. This short-sighted proposal was announced without any discussion with industry, no impact assessment, and no warning. It places UK airports and retailers at a massive disadvantage and will simply send millions in retail revenue to airports in Europe and further afield.

“If all tax-free sales are to be ended (other than liquor and tobacco), it will have a substantial and immediate impact on UK airports. Hundreds of millions will be lost in sales, and thousands of jobs are at risk – at a time when the industry is already on its knees. This could be the final nail in the coffin of several UK regional airports.”

In a nutshell

Travellers departing the UK for EU countries will be able to purchase duty-free liquor and tobacco from January 1, 2021. But in a bombshell addition to the legislation, tax-free sales at airports will be withdrawn for all outbound passengers from the same date on goods other than liquor and tobacco. That includes the all-important fragrances and cosmetics category, as well as fashion, luxury, and consumer technology.