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Ending duty-free shopping will mean £300m hit to airports

·2-min read
Heathrow
Heathrow

A plot to end tax-free shopping after the Brexit transition period will cost cash-strapped airports £300m every year, a new study claims.

As Heathrow prepares to take legal action over the tax change, a survey of the 20 biggest members at the Airport Operators Association (AOA) suggested they will lose an average of £15m annually from the scrapping of duty-free shopping on goods such as perfumes, electronics, clothes and chocolate.

It follows analysis by the research consultancy York Aviation which revealed that the loss of the VAT airside concession will cost the economy £2.1bn by putting passengers off from travelling to the UK. The proposals will put almost 20,000 jobs at risk.

The Treasury announced in September that the duty-free rules would be revised at the end of the Brexit transition period in January.

Shopping at airports has long been exempt from duty and VAT, which stands at 20pc. For most goods the saving is only available to passengers flying outside the European Union.

Under the reform, British passengers travelling to EU countries would be able to take advantage of duty-free alcohol and tobacco sales in ports and airports, bringing them into line with non-EU travellers.

However, the Treasury also vowed to end tax-free sales in airports of goods such as electronics, clothing, perfume and confectionery. It highlighted concerns that the cut was not always passed on to consumers in airport shops.

It was also claimed that some tax-free goods were bought by UK-based travellers who then brought them back into the country, putting high street retailers at a disadvantage.

Earlier this week, it emerged that Heathrow has filed a pre-action notice in a legal challenge to halt the tax change. The airport is being supported by duty free shopping firm Dufry and tax refund specialist Global Blue.

Economic Intelligence newsletter SUBSCRIBER (article)
Economic Intelligence newsletter SUBSCRIBER (article)

Karen Dee, AOA chief executive, said airports have been losing about £83m a week since international travel came to a crashing halt earlier this year due to Covid.

She said: “The decision to end tax free shopping only adds further pressure on a sector fighting for survival, and could cost UK airports £300m every year as well as putting thousands of jobs at risk.

“We hope that the judicial review will cause the Government to pause and reflect on its ill-considered decision and scrap these misguided plans.

“It is high time that the Government understood the brutal reality facing our airports, scrapped these unnecessary, ill-informed and ill-considered changes and worked with its once world-beating aviation industry to secure jobs, businesses and livelihoods across the country.”