The campaign to save UK tax free sales suffered a hefty setback this week after government legislated to remove the VAT Retail Export Scheme (VAT RES).

On Thursday (3 December), it emerged that a statutory instrument had been laid confirming the removal of VAT RES at 11pm on 31 December.

TRBusiness launched a petition to ‘Keep tax-free sales at airports and the VAT Retail Export Scheme’ in October and it hit 10,000 signatures on Wednesday. The government is now obliged to respond.

A HM Revenue & Customs statement regarding ‘The Travellers’ Allowances and Miscellaneous Provisions (EU Exit) Regulations 2020’ read:  “At the end of the transition period the government will make changes to the rules for the VAT and excise duty treatment of goods for personal use that are brought into and taken out of Great Britain in travellers’ luggage.

FIGHT CONTINUES…

It continued: “The new rules will also cover the provision of duty free sales to passengers bound for EU destinations at ports, airports and international railway stations and on-board ships, planes and trains on international routes.

“The VAT Retail Export Scheme will not be extended to EU visitors and will be withdrawn for non-EU visitors in Great Britain from 1 January 2021.”

The government says that differing rules under EU legislation for those travelling to or from the EU and those travelling to or from non-EU countries require alignment at the end of the Brexit transition period.

This is to ensure that all travellers are ‘treated equally’.

Travel retail businesses and travellers arriving or departing from England, Scotland and Wales will be affected.

Duty free liquor and tobacco sales to EU-bound passengers will return, with personal allowances increases.

Businesses, including retailers and airports, and MPs from different parties have insisted that Chancellor Rishi Sunak delay the decision to remove the airside extra statutory concession and VAT RES scheme for international tourists to the UK in favour of a fuller review of its impacts.

Pressure on government has intensified significantly in the past week after the independent Office for Budget Responsibility stated the Treasury’s tax windfall from axing VAT RES would be £360 million.

It is reliably understood that on Monday the judiciary ruled against a claim brought by Heathrow Airport, Global Blue and Dufry regarding the implications of the hit to retail and tourism from the Treasury and HM Revenue & Customs’ decision to scrap tax free shopping and withdraw the airside extra-statutory concession at UK airports.

As reported, the parties mounted a judicial review against the government’s decision in November.

A spokesperson from Heathrow told TRBusiness: “Heathrow and the other claimants (Global Blue and World Duty Free) have already been granted permission to proceed on two issues.

“These are, whether the airside extra statutory concession could be amended or extended, and the options under World Trade Organisation rules.

“However, we believe there to be serious issues that should be considered by a court in relation to other grounds and despite the fact that the court disappointingly ruled against us on Monday, we intend to take further steps to ensure that those are heard.”

Dufry declined to comment when approached, but a Global Blue Spokesperson remarked: “Global Blue is disappointed that the government is continuing with its decision to withdraw tax-free shopping in the UK from 1 January 2021.

“We believe the data provided by the industry is compelling in that it demonstrates the Treasury has taken the decision based on incorrect and incomplete information. We remain committed to seeing this properly considered by the court.”

Sally Alington, Founder and CEO, Ethos Farm added: “Yesterday’s decision by the UK government is devastating on so many levels. While not everyone in the UK makes a tax free purchase when they fly out, this decision is so much more than that.

“Think of the tourists who will now not choose London as their shopping destination. That impacts hotels, restaurants, tourists attractions and shows. Imagine the cost of changing tills, pricing, employee comms and consumer comms.

“It affects all of us and we must all come together to demand a reversal.”

For full details of the statutory instrument, click here.