Government must reverse plans to hit UK airports with £300million VAT hit

Wednesday 4th November 2020

The Airport Operators Association and the UK Travel Retail Forum have today called for the Government to scrap plans to end tax-free shopping in the UK from January 2021 following the launching of a judicial review into the plans by Heathrow Airport, Dufry and Global Blue.

In September, the Treasury announced that VAT would be levied on all airside purchases from January 1st, 2021.  An analysis by York Aviation’s shows that the loss of the VAT airside concession will cost the UK economy £2.1billion in GDP and will put 19,400 jobs at risk nationally.

Today, the AOA has released the results of a survey of members that shows that the proposed changes to the taxation of airside retail could cost UK airports as much as £300 million a year, on top of significant financial losses as a result of the pandemic. These figures cover airside retail only and the proposed wider changes to VAT refunds are likely to have a devastating impact on UK high streets, retail and tourism.

Karen Dee, Chief Executive of the Airport Operators Association said:

“The launching of a judicial review by Heathrow Airport, Dufry and Global Blue reflects the significant concerns of the whole aviation industry about the Government’s misguided plans to end tax free shopping and the impact that it will have on UK airports. 

“Our aviation industry is currently facing an unprecedented challenge, with the decision to ban international travel coming on top of seven months where airports have on average been losing around £83 million a week.

“The decision to end tax free shopping only adds further pressure on a sector fighting for survival and could cost UK airports £300 million every year as well as putting thousands of jobs at risk. We hope that the judicial review will cause the Government to pause and reflect on its ill-considered decision and scrap these misguided plans.

“It is high time that the Government understood the brutal reality facing our airports, scrapped these unnecessary, ill-informed and ill-considered changes and worked with its once world-beating aviation industry to secure jobs, businesses and livelihoods across the country.”

 Cameron Gray, Secretary General of the UK Travel Retail Forum said: 

“The UKTRF and its members whole-heartedly support London Heathrow, Dufry and Global Blue’s judicial review application regarding the Government’s decision to end tax-free shopping in the UK from January 2021. 

“As representatives of the UK’s travel retailers and airport operators, on Friday 11th September we were stunned the UK Government could make such and ill-informed and misjudged decision. 

As an industry on its knees during the COVID outbreak, and now staring down the barrel of a second national lockdown, this policy would be yet another nail in the UK travel industry’s coffin. 

“With thousands of UK airport jobs already lost to COVID-19, an anticipated 19,400 additional jobs throughout the UK are now also needlessly in jeopardy. 

“The decision to axe airport tax free shopping entirely, not only comes as a complete shock but has fundamentally blindsided the industry, with little to no opportunity for us to respond. 

“We urge the Government to not only reverse this misguided decision, but urgently review the initial consultation to give the entire industry the opportunity to voice its concerns.”