Airport retailers failing to pass VAT savings directly to customers despite investigation

WHSmith pledged on Sunday to discount the 20% VAT it charges to travellers directly from the sale price - some other retailers have yet to follow their example

World Duty Free has said that it passes all VAT savings it makes to its customers (Reuters)

Airport retailers are still not passing on the tax they have been charging on tax-free sales directly to customers, almost a year after an Independent investigation into the practice.

In August 2015, retailers including WHSmith, Dixons Travel and Boots were exposed for making customers hand over their boarding passes as a “security measure” when making purchases.

These retailers instead used the information to keep the VAT owed to customers flying outside the EU. For a £6 bottle of suncream, that’s £1 going into the pockets of the retailer rather than to the customer.

Almost a year since the investigation, WHSmith has said all passengers travelling outside Europe will get a discount, but only for items costing £6 or more. Money saving expert, Martin Lewis said that "we should all breathe a sigh of relief that finally after a ridiculous wait and a lot of pressure, WHSmith have wilted."

Other retailers, including Boots, have since made clear that handing over boarding passes is optional.

John Lewis has said it has always passed on savings. “Pricing at John Lewis Heathrow is the equivalent of our standard high street price less the value of VAT. This discounted price is available to all customers, regardless of destination,” a spokesperson said.

But some have yet to offer this clarity.

A spokesperson for Dixons Travel told The Independent that unlike WHSmith, it does not pass on the discount to individual customers.

Instead the benefit is used to support its promise to price match Amazon, Argos and John Lewis.

Lewis said that to only offer to match prices "ridiculous" and a "nonsense promise". He advised customers who had any doubt that tax-free benefits were being passed on to them to withhold their boarding passes when making purchases.

"Let me make it very clear though that this does not apply in duty-free shops where it is a legal requirement to show your boarding pass," he added.

In December, governemnt figures estimated that some retailers were keeping 50p in every £1 of VAT. George Osborne described the practice as "simply inacceptable" and ordered an "extensive" HMRC review.

Lewis commented today that "an extensive review means one that takes so long hopefully everyone will forget about it. I could have done this review in five minuutes."

HMRC was due to announce its findings this spring but has yet to report.

Retailers now say that they are conducting the review themselves. Heidi Woodhouse, managing director of Dixons airport shops stated: “Dixons Travel are part of the UK Travel Retail Forum and have been involved in the review of the policy in conjunction with other retailers.”

A spokesperson for World Duty Free, also a member of UKTRF, said that it does not offer dual prices with and without tax. Instead, the company, “always ensured that all VAT savings are passed onto customers and will continue to do so.”

UKTRF is a group of airport retailers, drinks companies, tobacco manufacturers and airport executives which lobbies government on behalf of its interests. It has previously persuaded the Department of Health to grant an exemption to airports from tobacco advertising restrictions.

A spokesperson for the group said that work on a new code of practice is still ongoing but that it aims to publish it by September or October. UKTRF’s spokesperson said its members’ compliance departments were still considering the guidelines.

It means the code, which will be voluntary, will not be in force during the busiest months of the year when millions will fly from UK airports on summer holidays.

The contents of the code are not yet known but a spokesperson for UKTRF said that the WHSmith commitment to pass on savings would be “indicative” of the new approach.

“This is all about transparency. We want to put in very plain terms how the VAT concession is being used,” the spokesperson said.

Boots, another UKTRF member, did not respond to our requests for comment.