Embargoed: 00:01 Saturday 17 October 2020
- The government plans to scrap VAT-free sales in airports for items such as electronics, food and clothing for passengers travelling outside the EU.
A new briefing note shows that the change could cost UK residents who fly to non-EU countries an extra £12.1 million in tax each year.
Changes also include stopping international visitors benefiting from tax-free shopping on the UK’s high streets.
MPs have warned that this is the worst possible time for such measures, given the impact on the economy.
Analysis by the TaxPayers’ Alliance (TPA) reveals that Brits could have to stump up an extra £12 million on airport shopping each year as a result of a recent tax change.
Last month, HM Treasury quietly released plans to scrap VAT-free sales in airports for items such as electronics, food and clothing for passengers travelling outside the EU.
The move is a kick in the teeth for sun worshippers desperate for a well-earned break, especially after being unable to fly overseas for much of this year due to covid-19. The fall in demand this year has seen a notable impact on the travel industry, with London Heathrow finding retail revenues down 56 per cent during the first six months of 2020.
The controversial price hike is part of a wider package of tax announcements which has been opposed by MPs. It also includes stopping international visitors benefiting from tax-free shopping on the UK’s high streets. This incentive has helped to attract thousands of tourists to Britain each year and created jobs across the country.
Together these measures could also have a disastrous impact on the economy, particularly on sectors that have struggled profoundly during the pandemic.
- The government announced in September 2020 that from January 2021, duty free purchases will be extended to British passengers travelling to EU countries.
- However, tax-free sales in airports of some goods – such as electronics and clothing – will end for passengers travelling to non-EU countries. Such a change could mean that the UK is the only country in Europe not offering tax-free shopping.
- If this change is implemented at the end of the transition period, this could cost UK residents who fly to non-EU countries an extra £12.1 million in tax each year.
- According to York Aviation, the impact of the change could also lower UK GDP by over £2 billion and lead to 19,400 job losses.
Duncan Simpson, research director of the TaxPayers’ Alliance, said:
“Some of these VAT changes will heap more misery on embattled holidaymakers and a struggling sector.
“Hiking holiday prices at the same time as making the UK a less competitive place for international shoppers could cost thousands of jobs and damage growth, with the travel industry already on its knees from the coronavirus crisis.
“Ministers must get their heads out of the clouds and pause these changes before it’s too late.”
Sir Geoffrey Clifton-Brown, Member of Parliament for The Cotswolds said:
“Alongside the wider economic impact of the VAT changes, this move will hit British taxpayers in the pocket.
“Abolishing tax free sales on airport goods like electronics, food and clothing will see a £12 million tax hike on future holidays, with knock on impacts for the retailers and airports who are already struggling. We need to encourage as many visitors as possible from around the world to come to the UK to help support tourism and related businesses in areas like the Cotswolds and elsewhere.
“This is the worst possible time to be hiking taxes on the Brits who may venture abroad next year, and makes the prospect of recovery for the travel industry even more remote.
“But it would be one piece of really cheerful news in the middle of the covid pandemic for UK travellers to Europe to be able to have the prospect of duty free shopping."
TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)
Media Campaign Manager, TaxPayers' Alliance
24-hour media hotline: 07795 084 113 (no texts)
Notes to editors:
- Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.
TaxPayers' Alliance's advisory council.
- On 11 September, HM Treasury published a Written Ministerial Statement which stated that, from January 2021, the Government will be ‘ending tax-free sales in airports of goods such as electronics and clothing for passengers travelling to non-EU countries’. In addition, HM Treasury confirmed that as part of these changes, VAT refunds for overseas visitors in British shops will be removed. Read the announcement here.