The government has been accused of delivering a fresh “hammer blow” to aviation after announcing the abolition of tax-free sales and VAT relief on goods bought by overseas visitors.
The Airport Operators Association (AOA) condemned the move announced by the Treasury yesterday (September 11) saying it “needlessly harms an industry in peril”.
The Treasury will end tax-free sales at airports, ports and Eurostar stations from January 1 as the Brexit transition period ends and the government harmonises treatment of EU and non-EU travellers.
Tax-free sales of goods not subject to customs duty are currently allowed for travellers to non-EU countries.
AOA chief executive Karen Dee accused the government of “a complete lack of awareness for the jobs and businesses on the line in the aviation sector”.
The government said it chose to abolish the right rather than extend it to travellers to EU states because it had “concerns over how the benefit is passed on to passengers and in some instances the relief is not consistent with international tax principles”.
At the same time, the VAT retail export scheme which allows now-EU visitors to obtain refunds on goods bought in Britain will be withdrawn from January 1.
The Treasury announced: “Overseas visitors will no longer be able to obtain a VAT refund on items they buy in Britain and take home in their luggage.”
It argued: “The scheme is a costly relief which does not benefit the whole of Britain equally, with current use largely centred in London.”
Retailers will still be able to offer VAT-free shopping to overseas visitors who buy items and have them delivered overseas, and this will be extended to EU visitors.
Duty-free sales, currently available only when travelling to non-EU countries, will be extended to travellers to and from the EU and personal duty-free allowances on alcohol will “significantly increase”.
However, travellers arriving from the EU will no longer be able to bring back unlimited amounts of alcohol, tobacco or other goods without declaring them and paying tax.
Travellers from EU and non-EU countries will be allowed three crates of beer, two cases of still wine and one case of sparkling wine duty free from January. The allowances for tobacco and other goods will remain as now.
Dee said: “Our industry can scarcely afford another hammer blow like this.
“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 Government said the rules had “to be aligned following the transition period so EU and non-EU passengers are treated equally”.
The announcement followed a consultation launched in March
Northern Ireland will sit outside the new tax and duty regime for the time-being while the Irish border and customs dispute between the UK and EU remains unresolved.