Provide cost benefits on decision to scrap UK tax free sales, MPs demand

By Luke Barras-hill |

The UK government is facing calls from the Treasury Committee to supply evidence on the decision to axe tax free sales at airports from 1 January 2021.

In a shock development, HM Treasury and HM Revenue & Customs announced last month an end to the extra-statutory concession on all airside items (excluding liquor and tobacco) at the end of the Brexit transition period (31 Dec), prompting anger from industry associations.

The VAT Retail Export Scheme (VAT RES), a lucrative draw for high-spending tourists from the likes of China, the Middle East and the US who are able to reclaim tax on luxury purchases, will also end.

However, duty free sales to EU-bound travellers will restore.

Rt Hon. Mel Stride MP, Chair of the Treasury Committee, has written to UK Chancellor Rishi Sunak. Source: UK Parliament.

CONSULTATION CONCERNS

Following a Treasury Committee evidence session held on 7 October, Committee Chair Mel Stride MP wrote to UK Chancellor Rishi Sunak for a cost benefit analysis behind the decisions.

The letter highlights concerns raised in the Committee evidence session surrounding the consultation process, particularly ‘that it was not made clear that abolition was the leading option’.

This concern was relayed to TRBusiness by the travel retail lobby when news of the concession scrappage first emerged on 11 September.

“The Committee has been told that this will be a major blow to many retailers serving the struggling tourism sector,” said Stride in a statement. “It could be seen as the UK imposing a tariff on its own exports.”

“Witnesses in a Treasury Committee evidence session raised concerns about the government’s consultation that drove these changes to VAT.

“I’ve asked the Chancellor to provide the Committee with the cost benefit analysis behind these decisions so that we can consider these issues further.”

The Treasury Committee is appointed by the UK House of Commons to scrutinise the expenditure, administration and policy of HM Treasury, HM Revenue & Customs and associated public bodies including the Bank of England and the Financial Conduct Authority.

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