Airport VAT scam: Nice little earner at travellers' expense

The quest for retail earnings is helped by public confusion over airport shopping

Simon Calder
Friday 07 August 2015 19:23
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A passenger plane comes into land at London City Airport
A passenger plane comes into land at London City Airport

British travellers are blessed with the best aviation industry in the world. Besides being implausibly safe, it is highly competitive.

While fees earned from airlines from handling their aircraft comprise the mainstay of airport revenue, spending passengers is extremely important. Whether you leave a car in the short-stay car park, change money or buy a coffee, a slice of your cash is going to the airport. And the retail labyrinth that passengers must run at any of our big airports shows the importance attached to shopping. “A mall with a runway attached,” sums up many of them.

The duration of a journey to an airport, and the length of the queue for security, are both unknowns. Travellers rationally allow hours just in case. When, as mostly happens, the process is relatively smooth, they have plenty of “dwell time” on their hands. And from the airline’s point of view, the most lucrative use of that time is going shopping.

The quest for retail earnings is helped by widespread public confusion over airport shopping. Just because a shop is labelled “Duty Free” does not mean that a purchase is free of government tax. Most British passengers are travelling within the EU, and their airport purchases are thereby subject to VAT at 20 per cent.

Retailers, who are typically paying a small fortune to the airport in rent and revenue sharing, are keen to cut costs where possible. And an easy way to do that is to avoid sending more than they need to the Chancellor.

Airports may insist that the motive for the irritating demand from their retailers to see a boarding pass is “to understand how demand in our shops changes according to destination, times of the day or during different seasons,” the real reason is to identify purchases for which no VAT is due.

As a passenger going to New York in urgent need of a toothbrush, I am not going to begrudge the retailer keeping the 20p tax on a £1.20 purchase. But spread across millions of transactions, the phantom VAT amounts to a tidy sum diverted from the traveller’s pocket.

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