How does it work? A UK airport shop places a product on sale with 20% VAT added. For example, a tube of sun tan lotion whose gross price is £5 will be sold at £6. The customer purchases the item and their boarding pass is scanned. The shop later pays VAT on all sales to customers travelling within the EU VAT area. It pays no VAT on sales outside the EU, although the customer has paid VAT. Residents of countries outside the EU VAT area (including the Canaries) are eligible to reclaim VAT on their purchases. However, to do so they must make their purchase in a special “Tax Free Shopping” shop, fill in forms, show necessary documentation and pay an administration charge. For small purchases, the queues and paperwork involved mean that this is an unattractive prospect.
12 | September 2015 | The Gazette
Last month´s “Boarding Pass Revolution” has highlighted the way that airport duty-free shops make money without passing on the benefits to passengers - and those flying to the Canaries are among the worst-affected.
If you´re reading this article in Lanzarote, you probably arrived here by air, and if you decided to shop for gifts at the airport, you were almost certainly asked to produce your boarding pass.
on passengers flying outside of the ECCVA are not passed on to customers. In most cases, UK airport shops are just as expensive as those in the High Street.
Until recently, most travellers assumed this was a security measure. However, the truth was revealed last month in an investigation by The Independent newspaper.
The inconvenience of producing your boarding pass is not for your benefit or security. It´s simply helps the shops save on tax.
Firstly, there is no legal requirement to show your boarding pass while making a purchase in a “dutyfree” shop. A spokesman for Her Majesty´s Revenue and Customs (HMRC) has stated “There is nothing in VAT law to require the production of a boarding pass to purchase goods in airport shops, but without such evidence the supply cannot be zero-rated as an export.” It´s the phrase “zero-rated as an export” which explains why you find yourself fumbling to find your boarding pass while buying items at the airport. Airport shops only have to pay VAT on items purchased by passengers travelling to destinations within the European Common Customs and VAT Area (ECCVA). If the destination lies outside this area – as the Canary Islands do – the shops have no obligation to declare VAT. Yet no passenger flying to Canarian airports will be offered any discount, and it has also been shown that the overall savings that UK airport shops make
Consumer affairs expert Paul Lewis told The Independent, “Retailers are not being straight with the public. They are asking to see passengers’ boarding cards but not telling them that this is so they can make more money by not paying the VAT on what they’re selling. What of course they should be doing is passing on the savings that they make to the passengers who are travelling outside Europe.” If Canarian-bound passengers were to benefit from the “zero-rated” discounts, it could mean savings of one sixth on any VAT-rated product sold at an airport, such as adults’ clothes, cosmetics and electronic equipment. The first step to changing this is to refuse to produce your boarding pass if asked to do so. You won´t save any money, and certain shops may refuse to serve you, but it´s an action that may force the shops to change their policy.