Heathrow in legal action over UK tax free scrappage

By Luke Barras-hill |

London Heathrow Airport is priming a legal challenge against the government’s decision to abolish airside tax free sales and the VAT Retail Export (VAT RES) scheme, TRBusiness can confirm.

Travel retail juggernaut Dufry and tax refund specialist Global Blue are also backing plans for a judicial review.

The escalating opposition comes just days after this publication launched its own consumer-facing petition urging ministers to reconsider a ‘hammer blow’ to the UK’s economy that could result in thousands of job losses while costing the Treasury billions of pounds in lost tax revenue and tourist spending.

REVERSE ‘MISGUIDED’ DECISION 

A joint statement from the claimants obtained by TRBusiness read: “We continue to work with Treasury ministers and officials regarding this matter.

“We believe there are solutions available that can address concerns, whilst protecting the UK’s competitiveness as a shopping destination and airport retail in a year that will be so critical as it recovers from the worst year in history.

“All are responsible for employing thousands of people and securing billions of inward spend each year. We are exploring all options available to us on this decision.”

Sources close to Sky News, which broke the story, claim that Whitehall was alerted to a challenge – purportedly under discussion for several weeks – via a pre-action notice lodged in the past seven days.

Cameron Gray, Secretary General of the UK Travel Retail Forum commented: “The UKTRF and its members wholeheartedly support London Heathrow, Dufry and Global Blue’s judicial review application regarding the government’s decision to end tax-free shopping in the UK from January 2021.

TRBusiness has launched a consumer-facing campaign calling for the government to u-turn on the decision to ban tax free.

“As representatives of the UK’s travel retailers and airport operators, on Friday 11 September we were stunned the UK government could make such an ill-informed and misjudged decision.

“As an industry on its knees during the Covid outbreak, and now staring down the barrel of a second national lockdown, this policy would be yet another nail in the UK travel industry’s coffin.

“With thousands of UK airport jobs already lost to Covid-19, an anticipated 19,400 additional jobs throughout the UK are now also needlessly in jeopardy.

“The decision to axe airport tax free shopping entirely, not only comes as a complete shock but has fundamentally blindsided the industry, with little to no opportunity for us to respond.

“We urge the government to not only reverse this misguided decision, but urgently review the initial consultation to give the entire industry the opportunity to voice its concerns.”

The government has insisted that maintaining the VAT-RES scheme would be ‘costly’ while expressing concerns that the current extra-statutory concession for airside tax free sales is being applied ‘inconsistently’ and would not be extended to EU-bound passengers, and, therefore, in line with WTO rules would end for all passengers next year.

A Treasury spokesperson declined to comment directly on the legal challenge, but stated: “We recognise the challenging times facing the aviation sector, which is why we have acted quickly to provide the industry with an unprecedented package of support, including action on airport slots, loans, and tax deferrals.

“These tax changes followed extensive consultation with industry and mean that people travelling to the EU can buy beers, wines and spirits duty free for the first time in over 20 years – a huge boost to British airports.

“For travel outside of Europe, we’re ending tax free shopping on other goods in airports after concerns that the saving wasn’t always passed on to consumers, putting the high street at a disadvantage.

“Over 90% of non-EU visitors to the UK don’t use the VAT Retail Export Scheme and extending it to the EU could bring the total cost up to £1.4billion a year. They can still buy items tax free in store and have them sent directly to their overseas addresses.”

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