How The Independent's airport VAT campaign victory will affect you

Q&A: How will things change for airport travellers?

Specialist duty free shops are obliged by HMRC to record every customer’s destination (Reuters)

Q How significant are airport sales to retailers – and the airports themselves?

A Crucial for both. The airport takes a large slice of everything spent on its premises, whether you park in the short-stay car park, change money or make a last-minute purchase. Even with the airport helping itself to upwards of one quarter of sales revenue, shops in the terminal can be enormously profitable locations, thanks to the abundance of “dwell time” that most passengers have.

Nobody is entirely sure how long the journey to airport will take, nor how long it will take to get through security. So travellers rationally allow plenty of time just in case. When the process proves relatively smooth, as mostly happens, they have plenty of time to spare before their flight. Many passengers fill it by going shopping.

Q What does the law say on tax-free shopping?

For any journey within the European Union (between the UK and Spain, France, Italy, etc) tax- and duty-free shopping ended in 1999. But passengers travelling outside the EU, to destinations such as Switzerland, Turkey, America or Dubai, are liable for neither duty nor VAT on airport purchases that they take abroad.

For sales of spirits and tobacco, specialist duty free shops usually have a two-tiered pricing system, so low prices apply only for passengers flying to non-EU destinations. In these kinds of stores the retailer is obliged by HMRC to report every customer’s destination, by scanning the passenger's boarding pass.

But most goods are not liable to large amounts of duty – just normal VAT at 20 per cent. A £6 bottle of sunscreen includes £1 of tax.

Until now, airport stores have typically had a single, VAT-inclusive price on anything from batteries to cosmetics.

In 2015, The Independent revealed that many retailers ask to see customers’ boarding passes. In the case of that £6 bottle of sunscreen: if the passenger was heading for Greece the £1 in VAT had to be passed on to the Chancellor, while if the retailer discovered the destination was Turkey, it could keep the tax element.

Q What did George Osborne have to say about that?

A At the end of 2015, the then-Chancellor ordered a review of airport sales to make sure VAT savings were passed on to shoppers. The UK Travel Retail Forum, which covers everyone from distillers and tobacco firms to the airports themselves, said: “We welcome the opportunity to show HMRC the value that we offer to consumers and to demonstrate how airport retail generates vital revenue to underpin and sustain the success of British airports.”

Q What will happen when the UK leaves the EU?

A It is expected that the customs rules that currently apply for destinations beyond Europe will be imposed on travel to remaining EU countries. Therefore all sales at British airports will qualify for relief, except for domestic passengers. It could be that the present situation is reversed – that prices are shown without VAT, for example, but the tax is added for travellers flying within the UK.