WHSmith will refund the VAT component of the price of certain products to all travellers going from UK airports to non-EU destinations – instead of keeping the saving for itself as the company has done in the past. However, only individual items with a retail price of £6 ($8) or more are eligible, the company has confirmed to TRBusiness.

The refund system has already started at some of the convenience retailer’s 87 airside stores in the UK, but will be available at all stores from today (Wednesday).

Last summer, there was a scandal when it was discovered that some airside retailers were not passing on VAT savings to non-European Union travellers but keeping them instead. Non-EU travellers should be able to buy their goods VAT-free when shopping airside.

The UK Treasury has said that “airside retailers are keeping up to an estimated 50p of every £1 of potential VAT savings instead of passing those savings on to shoppers”. Chancellor of the Exchequer at the time, George Osborne, opened a review into the issue, whose delayed findings are now expected to be revealed in the autumn.

In December at the enquiry launch, Osborne said: “VAT relief at airports is intended to cut prices for travellers – not be a windfall gain for shops. Many people could be paying over the odds for their purchases because the government’s VAT concession isn’t passed on. This is simply unacceptable.”

A £6 THRESHOLD

In advance of the government review, WHSmith has decided to act. A spokesperson for the retailer tells TRBusiness: “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.

“Customers who are travelling outside the EU and spending more than £6 on individual VATable items will get their VAT back.”

The retailer is not refunding consumers below £6 because each refund requires a manual intervention and would become a difficult-to-manage proposition it believes, especially at peak times when transactions can reach 10 per minute.

The company is investing in extra staff to ensure queues are not adversely impacted. It claims that from its research passengers do not want to queue longer if refunds were going to be very small. WHSmith says: “Below £6, the net VAT benefit will continue to be used to lower prices for all customers.”

SYSTEM UPGRADE FOR DECEMBER

The retailer is also working on system improvements – expected to be ready by early next year – which will include identifying non-VAT transactions and therefore removing the need for manual interventions.

The company also notes that a large proportion of its goods such as books, magazines and certain foods do not have VAT applied and therefore there is no saving to passengers. Examples of items which will be eligible for refunds are shown in the table above while the table below shows the saving that can be made.

Boots, another major UK retailer which was also heavily criticised in last summer’s scandal, has not yet commented on whether it will follow in WHSmith’s footsteps and start refunding VAT to its non-EU customers.