Case for UK arrivals DF builds amid race for new PM

By Luke Barras-hill |

UK duty free on arrival proposals received strong backing from MPs during an event in Parliament this month as the government claims the introduction risks ‘undermining’ UK High Street sales, TRBusiness can report.

Amid the frantically paced contest to lead the Conservative Party and the country, UK Travel Retail Forum (UKTRF) members in partnership with the Airport Operators Association, Scotch Whisky Association and airports including Heathrow and Gatwick hosted a drop-in event on 14 July to drum-up support for the arrivals duty free campaign ahead of the new incoming government on 5 September.

Currently, UK-bound travellers are able to avail of 42 litres of beer, 18 litres of still wine, or four litres of spirits or sparkling wine after the government quadrupled the allowance limits post-Brexit.

But duty free sales cannot be made on UK soil, something the lobby says is a disadvantage to airports, airport retailers and British businesses as the economic benefits are off-shored.

They have long argued that duty free on arrival could result in a much-needed boost to airports’ non-aeronautical revenue streams while offering a sustainable new source of income for international airports, rail stations and ports.

Awaiting feedback on research

Approached by TRBusiness, HM Treasury did not comment when asked whether the government had undertaken or planned to undertake its own detailed cost/benefit analysis of extending the duty free sales concession to arrivals shops – enabling passengers to take advantage of duty free sales.

However, a spokesperson said: “From 1 January 2021 the government extended duty free sales to EU-bound passengers for the first time in over 20 years. The government also introduced personal allowances for passengers entering Great Britain from the EU, placing Great Britain as having one of the most generous allowances in the world.

“The introduction of duty free on arrival could undermine the UK high street and run counter to public health objectives, as there may be more opportunity for passengers to bring in alcohol and tobacco products over their allowances, with the relevant taxes and duties unaccounted for. Other factors to consider include ensuring adequate infrastructure and resourcing to combat fraud.”

The UK duty free industry is yet to receive a response from government on independently commissioned research putting forward the case for UK duty free on arrival and says it would welcome the opportunity to meet with HM Treasury officials.

The UK duty free industry has long maintained that the introduction of duty free on arrival would not result in a material impact on domestic retail, as arrival store sales do not at present exist within the UK economy.

Instead, the mechanism would help to repatriate sales that take place at the point of departure – most likely in the EU.

It also counters the suggestion that the introduction would run against UK public health objectives as passengers entering the UK remain subject to the same limits of goods carried with them as their duty free purchases.

“UKTRF has been pleased to share independent, in-depth economic research with HM Treasury that demonstrates duty free on arrival stores would not have material impact on the high street, and would not generate additional sales of excisable goods, but rather provide the opportunity for passengers to make purchases they would already have made in the United Kingdom, instead of elsewhere,” Cameron Gray, Secretary General of the UKTRF updated TRBusiness.

“While UKTRF has not yet received detailed feedback on the research we submitted, we would welcome the opportunity to discuss further the fundings with HM Treasury officials. We are continuing to make the case that duty free on arrival stores would be a much needed boost for UK airports, ports and retailers, and exactly the kind of Brexit benefit the government is seeking to deliver following the UK’s departure from the EU.”

Last year, a cross-party group of more than 60 MPs and Peers wrote to then-Chancellor Rishi Sunak calling on government to unleash arrivals duty free to help support the travel sector to flourish while taking full advantage of the UK’s departure from the EU.

Heathrow Airport has called the proposition a big opportunity for government to put itself in a leading position ahead of its European competitors.

Arrivals hope within EU VAT Tourism Package

Arrivals tax free shopping can incentivise returning passengers to delay their purchase until they are on UK soil, believes Heathrow.

With generous allowances incentivising British nationals to spend more while abroad, Heathrow believes it is time to start making UK tax policy work for UK consumers and businesses.

“The UK government has generous duty free allowances but this only incentivises UK nationals to spend more while they’re abroad,” Fraser Brown, Retail Director, Heathrow Airport explained to TRBusiness.

“Arrivals tax free shopping will incentivise returning passengers to delay their purchase until they are on UK soil. This is about redirecting existing sales from abroad, not taking away sales from the UK high street. Passengers will still have to be within the allowances, protecting the UK market.”

As is already well established, the European Travel Retail Confederation (ETRC) is spearheading a concurrent campaign to convince EU legislators to authorise EU duty free on arrival in a bid to unlock sizeable economic benefits for airports.

The upcoming publication of the EU VAT Tourism Package next year offers a potential framework to pave the way for the introduction of arrivals duty free shopping the EU, it is gathered.

Speaking during TFWA’s Travel Outlook H2 2022 webinar last week, Julie Lassaigne, Secretary General, ETRC said: “The European Commission has announced it would publish this next year to support the recovery of tourism and travel sectors in Europe. As part of that, we may anticipate a proposal to allow arrivals duty free in the EU. That proposal would be published in the second quarter of 2023.

“At the moment, we are very busy working with the Commission, with the consultants drafting the study for the Commission to provide data and arguments in favour of duty free arrivals in the EU. That would be a huge boost for the travel retail sector but also for airports and the aviation sector, looking at the need for funding and investments in the next 28 years to be able to meet in particular the sustainability and environmental agenda on the road towards net zero emissions in 2050.”

A previously released ETRC-commissioned economic impact report from York Aviation on arrivals duty and tax free shopping in the EU suggests that such a change would have a positive impact on government revenues, helping to shift sales from outside the EU to inside the EU while boosting economic activity.

Sales from duty free arrivals shops could potentially account for 20-30% of the region’s total travel retail sales, the economic impact report has suggested.

Lead image source: Heathrow.

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