Duty free uncertainty remains as the United Kingdom leaves the EU

By Andrew Pentol |

Brexit_WTTC

Britain will finally leave the European Union tonight (31 January 2020).

There remains a strong element of uncertainty surrounding Britain’s departure from the European Union and what it means for the potential return of duty and tax free sales for UK- bound passengers from the EU (and vice versa), according to the European Travel Retail Confederation (ETRC).

Britain ended its long-standing union with Europe last night (31 January) at 11:00pm GMT, whereupon it entered into a transition period until 31 December.

During this time, the UK will continue to subscribe to the Single Market and Customs Union and the status quo will remain, meaning no duty free sales between the UK and EU.

As the country finally leaves the EU following three-and-a-half years of passionate and heated discussion, the hard work continues for the ETRC and its member associations.

These are actively engaging with governments to obtain the best possible conditions ahead of 1 January 2021. Prime Minister Boris Johnson has been clear he will not entertain any extension to the transition.

However, the terms of the withdrawal agreement allow the UK–EU Joint Committee to extend the transition period by up to two years, but it must sign off on the length of any extension before 1 July 2020. Should that window be missed, EU law makes is difficult to agree any extension.

Julie Lassaigne, Secretary General, ETRC told TRBusiness: “There is little time and a lot of work to be done to ensure the industry’s voice is heard clearly in Brussels, London and in capital cities across the European Union.”

NO DF RULE CHANGES DURING TRANSITION

In the interim, the UK will continue fully applying EU rules until the conclusion of the transition period. This means duty and tax free sales between the EU and UK will not be permissible, as alluded to.

As previously mentioned, duty free and tax free should be permitted in principle for EU-UK passengers and vice-versa at the end of the transition period, but Lassaigne remarked: “Practicalities of how this would function depends on the outcome of the future relationship negotiations.”

Should no deal be negotiated by the end of the transition period, the UK would be viewed as a third country, which in theory would trigger the return of duty free sales on the EU and UK side.

Heathrow-T3-WDF-Dufry-store

UK airports will be at a significant disadvantage should the UK Government choose not to reverse its decision to apply VAT on other airside products.

As reported, UK-bound travellers from the EU will be offered the choice to carry duty & tax free shopping and duty and tax paid goods into Britain in the event of a hard Brexit – but not both without possibly incurring added fees (see below).

In September, the UK Government committed to restoring duty free liquor and tobacco sales for travellers leaving the UK, which was viewed as a positive first step.

The industry had been campaigning for fair and sensible changes to the UK’s duty free structure for an extended period, so it was pleasing the government provided some certainty.

Fast forward around four months and several concerns remain. In September, it was formally announced that people shopping at UK ports, airports and international railway stations would benefit from duty free allowances should the UK leave the EU without a deal.

The announcement was made when the UK Government first presented its proposed duty free rules in the event of a no-deal Brexit. The ETRC is currently lobbying the EU authorities to allow duty free sales at EU international train stations to mirror the new rules in the UK, but is yet to make a breakthrough.

In the meantime, ETRC remains concerned at the UK Government’s unwillingness to axe plans to retain VAT on other airside purchases in the event of a hard Brexit.

If no resolution is found, UK airports and retailers will be at a considerable disadvantage compared to their EU counterparts after Brexit.

Speaking of disadvantages, UK-bound travellers from the EU could also incur fees if they are offered the choice to carry duty and tax free shopping and duty and tax paid goods into Britain in the event of a hard Brexit.

Lassaigne concluded: “Aside the duty free element, the future EU/UK relationship is likely to impact the daily business of retailers, distributors and suppliers, in terms of supply chain, custom controls and movement of goods.”

Lagardere-Travel-Retail-Belgium-store-large-new

At present, duty free sales will not be permitted in stores at EU international train stations, such as the new Lagardère Travel Retail Belgium outlet at Brussels-South station.

 

 

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