40 retailers sign up to UKTRF/AOA Code of Practice

By Doug Newhouse |

Top Boarding passAround 40 retailers representing 75% to 100% of all UK airport retail sales have now signed up to a new voluntary Code of Practice, aimed specifically at ‘greater transparency’ for customers on how VAT relief benefits apply to tax free purchases.

 

This follows the well-publicised national UK media frenzy last year, where some airport retailers were criticised for requesting passenger-boarding passes without refunding VAT on purchases.

 

This, in turn, led to the former UK Chancellor of the Exchequer George Osborne calling this ‘simply unacceptable’ and threatening a review.

 

NEW DAWN – NEW ‘CODE OF PRACTICE’

Much has subsequently happened since this storm broke last December, with a new Chancellor now in place and a brand new Code of Practice launched by the Airport Operators Association (AOA) and the UK Travel Retail Forum (UKTRF).

 

Both bodies are now hoping that this new industry-wide code will prove customer friendly and passengers will be reassured and clearly informed on when VAT refund benefits are applicable and under exactly what circumstances.

 

The furore over showing barding passes in shops began more than a year ago, as publicised by The Independent newspaper in the UK

The furore over showing boarding passes in UK airport shops began more than a year ago, as publicised by The Independent newspaper.

 

In a very positive move, the code also requires retailers to provide ‘a clear explanation to all customers’ on how the VAT benefit is used, plus when and why passengers are required to present their boarding passes [the source of much irritation for many passengers in the past-Ed].

 

small Clockwise WHSmith Stansted, Dixons Gatwick; WOrld Duty Free Heathrow T5; and Boots at Luton AirportBETTER COMMUNICATION – NEW REPORTING LINES

Most importantly, UKTRF and AOA also report that the vast majority of retailers who have signed up to the code have also agreed to report back to the UKTRF on how they implement it, with the emphasis hopefully delivering ‘current best practice’ on VAT relief in airports – and in a form that will be transparent – both in-store and online.

 

 

This initiative is also endorsed by UK airports, whose management say they will also ‘facilitate additional customer enquiries about the code’.

 

Airport Operators Association CEO Darren Caplan

Airport Operators Association (AOA) CEO, Darren Caplan.

Underlining how seriously the AOA has taken this matter, CEO Darren Caplan said: “AOA member airports are determined to ensure that passengers have an excellent experience from the moment they arrive at the airport to the moment they leave.

 

AOA SAYS TRAVELLERS WILL STILL GET ‘A GREAT DEAL’

“We have worked closely with airport partners and retailers to improve information and transparency about how the retailers apply the VAT-relief concession, ensuring travellers can continue to shop at UK airports confident in the knowledge that they are getting a great deal.”

 

Adding her comments, Sarah Branquinho, Chair of the UKTRF said: “Our members have an exemplary record of compliance with HM Revenue & Customs laws, Advertising Standards Authority guidelines and Trading Standards Authority consumer legislation, but the Code of Practice will go one step further in ensuring transparency and consumer trust.

 

European Travel Retail Confederation (ETRC) President Sarah Branquinho

Sarah Branquinho, Chair of the UKTRF (and President of the European Travel Retail Confederation).

“This new measure will help ensure that customers know that the savings resulting from the VAT relief concession are passed on to them.”

 

RETAILERS CURRENTLY SIGNED UP TO THE CODE:

As mentioned, those retailers that have signed the UK Code of Practice represent between 75% and 100% of retail sales at UK airports. To date, they include the following: Aelia; Aspinal of London; Attitude; Biza; Bobbi Brown; Boots; Bvlgari; Cath Kidston; Collection; Dixons Travel; Dune; Duty Free Store; Fat Face; Fortnum & Mason; Glorious Britain; Harrods; Hema; Hermès; Jo Malone; Lacoste; Lagardère; MAC; Nuance; Parfois; Reiss; Rituals; Samsonite; Sunglasses Boutique; Ted Baker; Temptation; Thinking Scotland; Thomas Pink; Victoria’s Secret; Watches of Switzerland; WHSmith; William & Henry; World Duty Free; World of Whiskies; and Zoodle.

 

 

 

 

LAST NIGHT’S PRESS CONFERENCE:

At yesterday evening’s press conference, held under a conditional reporting embargo until 09.00 this morning, it was also revealed that Boots had also joined other retailers as part of the code.

 

This news was related just as Hume Brophy Managing Partner John Hume (inset, below) asked UKTRF Chair Sarah Branquinho to comment on the initiative’s progress to date and what UKTRF now anticipates happening in the foreseeable future.

 

John Hume, Hume Brophy

Hume Brophy Managing Partner, John Hume.

Branquinho said: “As you know, this all kicked off last summer when we had a huge amount of media interest in what was happening at the airport and whether passengers were getting the benefit from shopping at the airport and so on and so forth and it came as quite a surprise.

 

 

TRANSPARENCY, TRANSPARENCY, TRANSPARENCY…

“We normally have a summer furore about something, but not to the extent we had then and as you know, the industry looked at it and asked what the problems were being raised by the media and it was mainly around transparency – where are passengers getting the benefits from specific pricing in airports and where aren’t they?

 

“So we sat down with our partners in Government, which is HMRC (HM Revenue & Customs) to start with and discussed where we were with it and a number of companies started discussions with HMRC.

 

“But while they were still ongoing there was the statement from the Chancellor saying that he was going to conduct a review and the Chancellor made a number of assertions about airport retailers not giving back money to customers.

 

HMRC

UK HMRC have been very helpful, according to Branquinho.

“So we set out to address that point and we ended up talking to several government partners – HMRC of course – and then the Department for Business Innovation & Skills and the Department for Transport. We started to talk to them about how the whole system worked and they understood that, but everybody agreed that we really did need to make it a little bit clearer for customers.

 

“So that was the reason we started to put together the Code of Practice as we call it. So the Code of Practice is very simple, because it is an over-arching code, which retailers are asked to sign up to and have to adhere to and each retailer is then responsible for their interpretation of the code, but they should be working in line with the code.

 

“Now what we have been doing in the last few weeks is once we finalised the code with the various government departments – and I have to say that they were extremely cooperative throughout making suggestions… making additions and looking at wording with us, and really trying to cover off where they thought that there were concerns.

 

 

IN-STORE SIGNAGE IS ON ITS WAY

“We came up with this final Code of Practice and then UKTRF worked with AOA and briefed them as well and then we started to talk to individual retailers at airports and asked them to commit to the code.

 

“So where we have got to today is the list that you see on the press release [see above, Ed] with the addition now since today of Boots which have signedsmall Clockwise WHSmith Stansted, Dixons Gatwick; WOrld Duty Free Heathrow T5; and Boots at Luton Airport up.”

 

Hume then added that signage should now start to appear progressively throughout UK airport shops, while Branquinho said: “I think the only thing I would add is that traditionally the Conservative government [in the UK-Ed] has been very much in favour of industries working out their own solutions, rather than having more and more regulation piled on.

 

“So I think they were in favour of this approach from the beginning – rather than impose something – and to work with the industry to make sure that we deliver the result without having yet more red tape.”

 

 

 

AIRPORT RETAILER CATEGORIES AND HOW VAT IS RETURNED TO THE CUSTOMER:

 

DIRECT BENEFIT:

These retailers sell at a VAT inclusive and a VAT-exclusive price for customers who are travelling inside and outside the EU respectively. Hence, the price paid by someone travelling outside the EU will be reduced by the VAT that would otherwise be charged. Only customers showing a boarding card for a non-EU destination will be entitled to the lower price and hence benefit from the relief.

 

SHARED BENEFIT:

These retailers will have a single price for EU and non-EU travellers (With the exception of some liquor and tobacco products) and will recycle the VAT benefit into lower prices for all customers, which may require customers to show their boarding passes to identify qualifying sales.

 

Retailers should make it clear to passengers whether this is an HMRC requirement (as part of an official agreement) or their own operating requirement. In all cases, the retailer will have signage in-store and on their website showing how the VAT benefit is being reflected in prices.

 

NON-PARTICIPANTS:

These retailers do not operate the VAT relief concession and charge customers VAT in the same way as any other store in the UK. These retailers will not ask for boarding cards.

 

 

 

CODE OF PRACTICE FOR AIRPORT RETAILERS: VAT RELIEF CONCESSION

 

  • 1. The benefit generated under the airport retailers’ VAT relief concession is directly reflected in lower prices for passengers in store and indirectly, lowering the cost of air travel.

 

  • 2. Retailers will provide a clear explanation to customers on how the VAT benefit is used and on when and why customers are required to present boarding cards. This explanation will be provided in store and on company websites.

 

  • 3. All signatory retailers must make a report to the UK Travel Retail Forum (UKTRF) on how they implement this Code of Practice. All changes to retail policy on the Code of Practice must be reported on an annual basis. UKTRF will maintain a register of signatory retailers.

 

  • 4. The Airport Operators Association (AOA) fully endorses this code and individual airports will encourage retailers to sign up to it.

 

  • 5. Individual airports will facilitate customer enquiries about compliance with the code.

 

Gatwick South shoppping shot

Gatwick Airport South Terminal shopping.

 

 

BACKGROUND AND ISSUE IN CONTEXT:

(Here, TRBusiness reproduces the UKTRF and AOA’s interpretation of the whole issue in context and in their own words).

 

Shopping at the airport has been very much part of the British holiday and travel experience since commercial aviation began, leading to the development of a large offer and to the creation of many retail jobs at British airports.

 

The income airports derive from discretionary spending at retail concessions has been a major contributor to the successful growth of British airports, allowing them to offer competitive airport charges to airlines and airline passengers, to invest in infrastructure and jobs, and to provide connectivity and choice to the British travelling public.

 

In 1999, intra‐EU duty & tax free sales came to an end. In order to continue to offer great prices to travellers through British airports, regardless of final destination, many retailers adapted their pricing policy to spread tax savings across the entire passenger base, to the ultimate benefit of British passengers – approximately two thirds of whom are flying domestically or to EU destinations.

 

Airport retail takes many forms – traditional duty & tax free retailers, High Street fashion & luxury retailers, electrical & electronics stores, and news, books and convenience stores. Many of them have one thing in common.

 

TRBusiness Managing Editor Charlotte Turner-BBC Breakfast 3 August 2016 explained to BBC Breakfast presenter Ben Thompson that a code of conduct was being prepared

TRBusiness Managing Editor Charlotte Turner told BBC Television Breakfast News presenter Ben Thompson last August that a Code of Practice was being prepared by the  Airport Operators Association (AOA) and the UK Travel Retail Forum (UKTRF).

 

They serve 365 days a year from the first to the last flight, a unique marketplace that changes completely every day, with customers who are on the move and in a hurry, and who have access to information at their fingertips which helps them decide what constitutes good value.

 

Airport retailers work in a highly-regulated environment. They comply with laws on taxation, with ASA (Advertising Standards Authority) guidelines on advertising standards, and with consumer legislation enforced by the Trading Standards Authority concerning information to passengers and display of goods etc.

 

Stakeholders have cooperated with HMRC in their 2016 review of Airside VAT Relief at UK airports. UKTRF and AOA, the representative bodies for British airport retailers and their airport partners, have taken the initiative to enshrine current best practice in an industry­‐wide Code of Practice to ensure even greater transparency for airport retail customers.

 

small Clockwise WHSmith Stansted, Dixons Gatwick; WOrld Duty Free Heathrow T5; and Boots at Luton AirportUKTRF and its members are keen to ensure that the British traveller continues to shop at the airport secure in the knowledge that they are getting a great deal regardless of where they are travelling.

 

Finally, a brief clarification on the need for presentation of Boarding Passes in airport shops: There are two types of airside retailers: duty free shops and tax free shops.

 

Duty free shops can sell goods where the excise, customs duty or VAT has been suspended. Sales in duty free shops are tightly controlled and HMRC requires these outlets to know where the passenger is travelling to before completing a sale.

 

When staff at duty free shops ask a customer for proof of destination they are simply following the rules set out by HMRC to ensure that everyone pays the right duty/VAT.

 

Other retailers are known as tax free shops. Sales to passengers travelling to destinations outside of the EU may be zero rated for VAT.

 

There is nothing in VAT law that requires a traveller to produce a boarding pass to purchase goods, but without such evidence (showing the destination) the sale cannot be zero rated and is liable to UK VAT.

 

 

 

 

 

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