Boots, Dixons and WH Smith back down in VAT row

Boots, Dixons and WH Smith have all given ground in the ongoing row over retailers pocketing millions of pounds in VAT discounts at airports, saying they will either no longer demand to see boarding cards or make clear this is not mandatory.

A spokesperson for Boots, which had previously confirmed it was claiming back VAT on goods it sells to customers flying outside the EU, but not passing the savings on to customers, told The Guardian the company would "no longer ask customers to show... their boarding passes" while it undertakes "a longer term review of this situation".

A spokesperson for Dixons said that while it does ask for a boarding pass at its airside stores and will continue to do so, this is "only on request and is not mandatory" and it has "re-issued existing guidance to all our colleagues confirming this as our clear process".

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The Independent, which first revealed the scandal last week, quoted a spokesperson from WH Smith saying it too has "reminded all staff of our policy" that "boarding passes should be requested and not demanded, such that there is no obligation on the part of the customer".

Without scanning a boarding card, retailers are not able to prove a passenger was travelling outside of the EU and thus cannot claim the VAT discount. A grass roots movement backed by the likes of shadow culture secretary Chris Bryant and Dragon's Den presenter Duncan Bannatyne has seen many shoppers refusing to comply with requests for boarding cards to force shops to change policy.

The climbdowns follow the intervention of David Gauke, financial secretary to the Treasury, who said the VAT discount for those travelling outside of the European Union was "intended to reduce prices for travellers not as a windfall gain for shops". He urged retailers to "use this relief for the benefit of their customers".

Another company caught up in the furore, World Duty Free, told trade magazine TR Business that, unlike the other retailers, it is an 'export shop', which means it receives goods on which all tax has been suspended. It said rules agreed with HMRC require to it ask for boarding passes but this does not allow it to reclaim tax, but ensures it pays the correct amount.

Treasury steps into airport VAT row

12 August

The Treasury has stepped into the row over alleged misuse of VAT rules by airport retailers, which have been told they should pass on discounts to savers and not simply bolster their profit margins.

A customer backlash that began after the practice was revealed by The Independent has seen shoppers at airport tax-free outlets refusing to show their boarding passes, thereby depriving the companies of a boost by claiming back the tax.

Some shops, such as World Duty Free, have said they will refuse to serve customers who do not present "a valid travel document".

In an interview with the newspaper David Gauke, financial secretary to the Treasury, said he was "concerned and disappointed" some retailers were pocketing millions of pounds in VAT discounts on sales to those travelling outside the EU.

He added the exemption was "intended to reduce prices for travellers not as a windfall gain for shops" and urged retailers to "use this relief for the benefit of their customers".

VAT is payable on sales within the EU, but not for those travelling outside the bloc. Shops routinely ask travellers to show their boarding card at the checkout in order to prove the discount is applicable, but an investigation found most of the stores, including Boots and W H Smith, do not pass on the savings to passengers.

The Independent says as an example World Duty Free charges customers £16.49 for a bottle of Absolut Vodka, on which it "could be making as much as £9".

Money Saving Expert founder Martin Lewis told BBC Radio 2 passengers should refuse to show their boarding pass to "force companies to take note and eventually take action". The Independent's travel editor, Simon Calder, told BBC Radio 5 Live there is "nothing illegal" about the practice but he would "always challenge it".

Boots told the BBC its policy is "in accordance with the rules set out by the government". W H Smith said it would be "impossible to have a pricing system which distinguished between travellers to EU and non-EU destinations".