Tax-free airport sales to end in January

The Airport Operators Association said the move ‘needlessly harms an industry in peril’

Duty free shopping is set to end in January (Getty Images)

The UK government is set to end tax-free sales at airports, ports and Eurostar stations from 1 January 2021, in what has been described as a fresh “hammer blow” to the ailing aviation industry.

From next year, overseas visitors will no longer be able to benefit from tax-free sales and VAT relief on goods purchased in the UK.

As the Brexit transition period comes to an end, the government justified the decision by citing “concerns over how the benefit is passed on to passengers and in some instances, the relief is not consistent with international tax principles.”

In addition, the VAT retail export scheme, which currently enables EU visitors to claim refunds on goods purchased in the UK, will also be withdrawn from the same date.

The Airport Operators Association (AOA) criticised the move, saying it “needlessly harms an industry in peril”.

AOA chief executive Karen Dee condemned the government for “a complete lack of awareness for the jobs and businesses on the line in the aviation sector”.

The Treasury announced: “As part of these changes, VAT refunds for overseas visitors in British shops will be removed. Overseas visitors will still be able to buy items VAT-free in store and have them sent direct to their overseas addresses, while the costly system of claiming VAT refunds on items they take home in their luggage will be ended.”

It described the scheme as “a costly relief, which does not benefit the whole of Britain equally”, adding that the current use is mostly centred in London.

Retailers will still be able to offer VAT-free shopping to overseas customers who purchase items and have them delivered overseas, including EU visitors.

Duty-free sales will also be extended to travellers to and from the EU, while personal duty-free allowances will “significantly increase”.

Visitors arriving from EU and non-EU countries will be allowed 42 litres of beer, 18 litres of still wine and 9 litres of sparkling wine duty free from next year. Allowances for tobacco and other goods will remain the same.

Travellers arriving in the UK from the EU will no longer be able to bring back unlimited amounts of alcohol, tobacco and other goods without declaring them and paying tax, however.

Ms Dee condemned the move. “Our industry can scarcely afford another hammer blow like this,” she said.

“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.”

She 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 UK government said the rules were part of a harmonisation process concerning EU and non-EU travellers and that the rules had “to be aligned following the transition period so EU and non-EU passengers are treated equally”.

Until the Irish border and customs dispute between the EU and the UK continues, Northern Ireland will continue with the existing tax and duty regime.