The Independent's campaign pays off for airline passengers as WHSmith hands back VAT to travellers

Exclusive: Airport retailers in pledge to pass on tax savings to travellers

Airport shops are obliged to collect 20 per cent VAT on all purchases made by travellers within the European Union

Following revelations in The Independent of airport retailers pocketing the VAT paid by passengers heading outside the EU, one of the UK’s biggest chains will today start returning some of the tax to eligible travellers.

At airport branches of WHSmith, passengers flying beyond Europe will get a discount – but only for items costing £6 or more.

Airport shops are obliged to collect 20 per cent VAT on all purchases made by travellers within the European Union and pass it on to HMRC. But for anyone flying beyond the EU – for example to Switzerland, Norway or any country outside the union – no tax is payable. On a £6 bottle of sunscreen, that should mean a saving of £1.

But last summer The Independent showed that a number of high street retailers were charging VAT-inclusive prices to non-EU passengers and keeping the tax element as profit. Some passengers who queried the request to show a boarding pass were told it was a “security requirement”. In fact, its purpose was to allow the retailer to calculate how much they could legally withhold.

In response, the then-Chancellor, George Osborne, demanded action on the practice. A Treasury review was expected to report by this summer, but, like so much Government business, it has been delayed because of the EU referendum and is now unlikely to publish its conclusions until the autumn.

Now The Independent has learned that WHSmith is set to give the appropriate discount for taxable items priced at £6 or more for passengers flying outside the EU. The company is still taking part in the Treasury review, but chose to launch its own refund scheme before the main summer holidays.

A spokesperson for the firm told The Independent: “Following customer research, focus groups and an in-store trial, WHSmith has introduced a new approach to the VAT relief concession at UK airports in time for the peak summer season.”

The rollout at UK airports begins today and will be completed by Wednesday.

The £6 figure was chosen because it represents a minimum saving of £1. The WHSmith spokesperson said: “Below £6, the net VAT benefit will continue to be used to lower prices for all customers.”

In order to qualify for the concession, eligible travellers must agree to have their boarding-pass scanned. Anyone who declines will be treated as an EU passenger, with their purchase subject to VAT.

While the benefit will be significant for eligible travellers, most WHSmith customers will see no difference. Almost three-quarters of British airline passengers flying abroad are staying within the EU. Even for those going beyond Europe, many of the goods on sale, such as books, water and sandwiches, are zero-rated.

If, as expected, Brexit leads to the re-imposition of customs limits to EU countries, the perk will become significantly more valuable.