World Duty Free fights back over boarding pass VAT scam. Who’s right?
Last week I wrote about how UK airports were profiteering from customers by demanding boarding passes and withholding VAT savings. The rest of the week saw the mainstream UK media going pretty wild over the boarding pass VAT topic. David Gauke, the Financial Secretary to the Treasury, even said:
The VAT relief at airports is intended to reduce prices for travellers, not as a windfall gain for shops
I also mentioned that Amsterdam Airport Schiphol were one of the offenders of this art, and in today's Metro Holland my story at the cashier became the headline for the day! Full article here.
Well my friend was passing through Bristol airport a couple of days ago, armed with the knowledge that a boarding pass was not required at check out. When he went to World Duty Free to buy a few things, they had security guards standing behind the till handing this leaflet out:
13.8.2015
For World Duty Free Group it is a legal requirement, specified by HMRC, to ask all passengers to show their boarding passes (stating flight number and destination) when buying all products in our airport stores. This procedure is an accepted and common practice in duty free shops around the world.
Unlike other airport stores, goods sold in duty free stores are brought onto the airport tax and duty-suspended (which means that the duty free retailer accounts for the taxes only when the product is sold to the customer). World Duty Free uses the flight destination information on the boarding pass to ensure that any applicable customs, excise duty &/or VAT is fully accounted for to HMRC. This process does not allow World Duty Free to reclaim any tax from HMRC, on the contrary it is the system agreed with HMRC that enables World Duty Free to make the correct payment to HMRC where applicable.
A copy of the regulation can be found at the following website:
This regulation is supplemented by a separate agreement between World Duty Free Group and HMRC (the Bespoke Retail Agreement Scheme) which stipulates that boarding passes must be presented when buying all products in order to enable World Duty Free to correctly account to HMRC for customs duties and VAT as appropriate.
For further information please contact:
customerservices.uk@wdfg.com
I can imagine all the retailers have had a very embarrassing few days, especially when all the newspapers had the same “Don't show your boarding pass” type headline. But to come out belligerent and continue to tell everyone it's a legal requirement (when all other outlets had admitted it is not) warrants further investigation.
Clicking the link in their statement takes you to a very detailed page about what constitutes an “Export Shop”. It's pretty long and sets out the financial mechanisms behind payments, accounting rules and the relevant legislations.
But excise duty and VAT are totally separate taxes!!!
Say after me: Excise and VAT are different. Excise and VAT are different. Excise and VAT are different….(repeat ad nauseam)
The simple fact is World Duty Free is trying to leverage public ignorance behind the difference between Excise Duty and VAT and still luring customers into handing over their boarding passes. There is this key statement in Section 1 of the same link.
Although an export shop can also hold goods liable to customs duty and VAT, this notice deals solely with excise goods (alcohol and tobacco), and should be read in conjunction with Notice 197.
The legal rules beyond here start to go outside my expertise, so I could do with a help here! But as far as I can tell, the key questions still remain:
- Is it really a “legal requirement” to show your boarding pass if you are buying items from an “Export Shop” that are not subject to Excise Duty, but are subject to VAT?
- If you do give your boarding pass, what happens to the VAT (not excise duty) if you are flying non-EU? (My guess is they still keep it – just like the other shops)
HMRC could do us all a favour here and present a statement about the arrangement they have with World Duty Free Group to clarify the customer's position. I somehow doubt they will as it is not their general policy to comment on individual retailers, so unless someone puts in a Freedom of Information Request (which might not even be honoured) then we could be left in limbo on this one.
Statement from HMRC is here http://www.trbusiness.com/regional-news/europe/airport-vat-retailers-defend-pricing-hmrc-presents-hard-facts/78949 and confirms WDF’s position.
Thanks Russell! TBH I’m not too surprised about the position adopted though it may confuse loads of travellers especially after last week’s furore to be asked again.
But it still means WDF have the ability to charge 0% VAT…
I work at a duty free in the US and lately a spate of UK passengers have been coming to the store specifically to raise this issue. It’s very irritating since this is not applicable here. At my store we are only permitted to sell to international passengers anyways and never charge taxes. It’s not like we’re selling to international and domestic passengers at the same rate and then pocketing the difference for certain customers instead of passing on the savings. So Brits, please get your facts straight before taking your protest abroad.
I’ve just tried to buy something at World Duty Free in Edinburgh, “available to all passengers”, and labelled with one price only. That implies to me that any saving they can make from passengers flying outside the EU will be kept by them. Since I am flying domestically, there isn’t a VAT saving to be made in this case.
The cashier pointed to the “HMRC requirement notice prominently displayed at the checkout counter and refused to go through with the sale if I didn’t present my boarding pass.
I left it. It’s not a though the savings offered are very worthwhile anyway.
Same thing happened to me today,staff insisted ‘legal’ requirement even though I said I was travelling within UK
Why doesn’t Hmrc make a comment on this?
The WDF statement is carefully worded to be disingenuous: it tells the truth but not the whole truth. It is deliberately misleading and designed to confuse. The scam is simple: (1) charge everyone a VAT inclusive price regardless of destination; (2) require submission of boarding pass by the client; (3) account to HMRC for intra-EU sales; (4) pocket the VAT on sales to people departing the EU. Write to Emma.McSweeney@wdfg.com and ask her to ‘clarify’ the statement! I doubt you will get a reply.
I had a standoff with WDF staff at Edinburgh airport Monday 14th September. I recall in the past not having my boarding pass (left it in capable hands of husband) and being asked where I was travelling to, no proof required. The WDF said this would NEVER have been the case ….. and so it went on with excuses that I could have arrived on a domestic flight and made my way to duty free! Ended up with 3 members of staff talking to me at the same time.
In the end I relented, really like the perfume haha!!
I had the same experience with World Duty Free shop at Stansted when flying to Prague. There should be no need to show a boarding pass when purchasing goods “available to all passengers” and when travelling within EU. If there is in existence claimed Bespoke Retail Agreement with HMRC stipulating that boarding passes must be presented when buying all products (regardless whether flying outside EU or not !) then the question is whether this actually is a legal requirement or not.