The UK’s Airport VAT Return Scam: Put Away Your Boarding Card
Have you ever wondered why you have to show your boarding card when shopping at a UK airport?
Travellers flying across the United Kingdom had a rude awakening in the middle of August when it was uncovered that airport stores were making millions of pounds by denying people travelling outside the European Union 20 percent value-added tax refund (VAT refund) on their purchases.
How was this possible, you ask?
Oliver Wright, The Independent journalist who first broke the story, had always wondered why passengers had to present their boarding card upon checkout when shopping at a UK airport.
So one day, out of sheer curiosity, he called Her Majesty’s Revenue and Customs (HMRC) to only find out that “there was no legal reason” for stores to request to see a customer’s boarding card.
HMRC did tell him, however, that stores “could claim back the VAT on purchases made by people flying out of the EU as long as they had the evidence in the form of a scanned boarding card.”
Hence, Wright discovered, instead of passing on VAT savings to those customers travelling outside the European Union, airport stores pocketed the VAT return and inconvenienced passengers, all in one fell swoop.
Dixons and Boots Back Down
Several British companies have already come under fire for bamboozling their customers in this airport VAT return scam.
Boots, Dixons and WHSmith, for example, have been targeted, with the first two already calling off their employees from demanding to see passengers’ boarding cards.
A Dixons spokeswoman said: “At Dixons Travel we do ask customers to show their boarding card when making a purchase, but this is only on request and is not mandatory. We have re-issued existing guidance to all our colleagues confirming this as our clear process.”
A Boots spokeswoman also talked about the company’s involvement in this practice: “At Boots we always listen to our customers and to help remove any confusion at this time, we have taken the decision to no longer ask customers to show us their boarding passes while we undertake a longer term review of this situation. We are currently in the process of notifying our airport store colleagues of this change.”
From the government’s standpoint, David Gauke, Financial Secretary to the Treasury, said, “While many retailers do pass this saving on to customers it is disappointing that some are choosing not to. We urge all airside retailers to use this relief for the benefit of their customers.”
WHSmith Under Fire Over Airport VAT Return
Analysts at The Independent believe that retail giant WHSmith may have made close to £50 million during the past five years putting this scheme in practice.
Based on their analysis of the situation, The Independent estimates that WHSmith collects close to £25 million per year in sales tax from its airport stores. Considering that approximately 40% of all travellers in the UK are headed somewhere outside the European Union, calculations suggest that WHSmith made an additional £10 million annually in the form of a VAT return.
Despite these revelations, WHSmith stated it would be complicated to pass on savings to the customer as it would require setting up a system that charges one price to passengers flying within the European Union and a discounted VAT-free one to all others.
Spokespeople for the book, magazine, newspaper and gift retailer also called The Independent’s figures on how much it made from the airport VAT return scam “wildly inaccurate.”
What Can You Do About the Airport VAT Return Scam?
It’s actually quite simple—if asked, refuse to show your boarding card. You are not required by law to show it, so do not expect to get in trouble by following through with it.
In a radio interview with Jeremy Vine on BBC 2, Money Saving Expert founder, Martin Lewis, said: “What we need to do if we want to get them to change their policy is quite simple: those of you who are going away this summer, outside the EU, when they ask for your boarding pass, say ‘No, sorry, I’m not going to give it to you, it only gives you a reduction, unless you pass that on to me I’m not going to give it to you. Please tell your bosses’.”