February 19, 2020

UK Airport VAT Scam – Storm in a Teacup or more evidence of Tax Avoidance by Big Business?

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Close-up of a rear view woman into the swimming pool on Maldivian resort.

In the UK it is the height of the holiday season with millions of travellers heading off to the sun, escaping the wind and rain of dear old Britain (mind you it’s sunny today). First stop for the holiday maker is the airport shops (now like shopping malls with an airport sideline).

 

Duty Free

Any purchase is greeted with a request to see your flight boarding pass. Virtually everyone complies with this, seeming to tie it up with the increased security requirements at airports.

 

boarding pass

The thing is the holiday maker doesn’t need to show the boarding pass. The retailer is scanning the pass to see if the customer is holidaying in the European Community (Value Added Tax has to be paid) or going outwith the EU (no VAT has to be paid). The shop has one price for the goods on offer, say it is £6 for sun tan lotion. The EU bound holiday maker should pay £6, but the non-EU customer should only be paying £5, there is no tax on the non-EU bound sale.

VAT scamTable is from The Independent Newspaper, who broke the story this week.

 

The shop has one price for the customers, so what happens to the £1 extra that the non-EU bound customer has paid? The retailer pockets this. They are not passing it on to the tax authorities, they are just boosting their profits and they are using the subterfuge of asking for the boarding pass so their computers can work out who are the non-EU customers and they will be charged the full price.

The companies that have been shamed over this practice in the UK are WH Smith, Dixons, Boots among others. Someone in these companies worked out that this is a nice little earner and if they all keep quiet about it, they can make a few tens of millions of pounds out of the gullible customers.

Does it matter?

After all it is just a pound or two on the sun tan lotion and other holiday essentials. Now that the scam has been uncovered, holidaymakers are furious and are refusing to show their boarding passes. The companies are under pressure to pass on the discounts to non-EU bound customers.

For the person in the street it is just another example of big business being unfair to customers, gouging them where they can. The banks have done it in the past and the reputational damage has been huge when the scale of the bank rip-offs were uncovered (in the UK, unneeded insurance policies and packaged bank accounts were sold to customers and ended up with the banks paying more than £20bn to compensate customers).

Is it worth damaging the company reputation for a little extra on the profits?

See here for more on the story

VAT Scam

Bank mis selling