Boots to stop pocketing the VAT on items over £5 sold to passengers travelling outside the EU
Boots is finally giving customers VAT refunds at UK airport “airside” shops, following the lead of WHSmith, which began doing this in summer 2016. Airline passengers began realising in the summer of 2015 that retailers had been claiming millions of ££s in VAT refunds from those travelling outside the EU, who they identified by asking to see travellers’ boarding passes. But instead of refunding the VAT to the customers, the stores pocketed it. This meant an increase in profit for the shops, and for the airports – and less for the Treasury. Boots has 29 branches at UK airports, and these shops don’t have self service tills – so customers can deal with a sales assistant. VAT will only be refunded by Boots on items costing over £5, (ie. refund of £1) or £6 for WH Smiths. Presumably a lot of purchases are below £5, and so the shops will keep a lot of extra profit from these. People flying within the EU cannot get VAT removed. The shops have been demanding to see boarding cards, but only because this has enabled them to keep the 20% as profit – that has angered people.The airports charge retailers huge rent, to have the privilege of a store in the captive market of the airport departure lounge. Heathrow etc don’t charge its stores a set flat rent – but rather a % of their net sales. This VAT change might slightly dent that figure.
Boots airport stores to stop charging VAT on items after being caught in tax rip-off
Exclusive: Britain’s biggest chemist chain bows to pressure to pass on tax savings to customers following The Independent campaign
By Ben Kentish, Simon Calder @BenKentish (Independent)
Boots has previously charged VAT on all items sold at airport stores – despite only having to pay the tax on purchase made by people travelling within the EU
Boots has begun refunding VAT to passengers at its stores in Britain’s airports, following a year-long review into the controversial practice.
The company’s 29 “airside” stores across the UK are now asking customers to show their boarding passes and will use the information to give the VAT back to eligible travellers – those flying to destinations outside the EU – on items costing £5 or more.
On taxable items costing less than £5, however, the VAT will be charged to customers but retained by Boots.
After The Independent revealed in 2015 how some of Britain’s biggest chains are pocketing tax rather than reducing prices for customers, Boots stopped asking passengers for boarding passes and treated every traveller as liable for VAT.
But after a year-long review the pharmacy chain has now decided to pass on some VAT savings to customers.
Asif Aziz, Stores Director, London & Airports for Boots UK said: “Over the past year we’ve been carrying out a comprehensive review of VAT relief concession at these stores to find the right solution to meet customers’ needs, while keeping our prices the same great value as in our high street stores.
“Today we will introduce a new scheme in which customers travelling outside the EU will not pay VAT on VATable items which are priced at or above £5.”
Airport shops are required by law to charge VAT on purchases made by travellers flying to a destination within the European Union, but passengers heading elsewhere are exempt from the tax.
However, an Independent investigation revealed that a number of companies, including Boots, were charging passengers the full price and keeping the VAT element as profit, rather than passing the reduction on to customers.
The practice depends on passengers presenting their boarding passes at checkouts – something many believe to be a legal requirement but which is, in fact, designed to help the companies avoid paying the VAT they are charging buyers.
With VAT charged at 20 per cent, the change in Boots’ policy will mean significant savings for consumers. A £6 bottle of sun cream, for example, would be reduced to £5.
While customers travelling within the EU will, for now, see no change, the re-introduction of customs barriers that may result from Brexit means the changes announced by Boots could become much more valuable to customers.
Some stores, including Harrods, already pass on VAT savings to customers but the majority do not. Last year WH Smith bowed to pressure from The Independent”s campaign and announced it would pass on VAT savings to passengers on purchases totalling £6 or more.
The Boots announcement is expected to put pressure on other airport retailers to follow suit.
Boots has also been in the spotlight for its tax avoidance
They say: “One study estimates that the tax illegitimately avoided by Alliance Boots since 2007 amounts to £1.21 billion – enough to pay for 85,000 new nurses for one year, or to cover the prescription charges for the whole of England for almost three years. At the same time, Boots is expanding its service contracts in the NHS. There is something not right about companies like Boots profiting from the NHS whilst contributing to the country’s public deficit through tax avoidance.” https://www.medact.org/project/alliance-boots-campaign/
Airport shops cheating passengers out of £ millions in VAT fiddle
The Financial Secretary to the Treasury, David Gauke said he was concerned and disappointed that airport retailers were pocketing millions of pounds in VAT discounts without passing the savings to customers. And that this should stop. Stores at airports demand that passengers present their boarding cards at checkouts before paying for any goods, in order to avoid paying 20% VAT on everything they sell to customers who are travelling outside the EU. Most of these stores, including Boots and W H Smith, do not pass on the savings to passengers. The Independent says this ruse is also used by so-called “duty-free” shops to boost their profits on alcohol sales, thereby making profits of up to 100% on each alcohol sale they make to travellers leaving Europe. UKinbound chief executive said visitors to the UK already have the impression that the UK is an expensive destination – and this is not helping. The airports charge retailers huge rent, to have the privilege of a store in the captive market that is the airport departure lounge. Exact figures are hard to come by and not publicly available, but Heathrow alone last year made around £400m in rental income from its airport 345 concessions and stores. Unlike on the high street Heathrow does not charge its stores a set flat rent – but rather a % of their net sales. On average each retailer is paying over £1m a year in rent. If airports did not charge so much rent to their shops, they would not be as profitable. This story confirms the adage of airports being “shopping malls with a runway attached”.