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In Law there is no mandatory onus to produce your boarding card to be scanned at the airport checkouts before paying for goods. Regardless of this fact, an overwhelming majority of shops located in airport terminals insist that passengers present their boarding cards, even in circumstances where a newspaper is purchased.
Legally, retailers at the airport do not have to pay value added tax ("VAT") on goods sold to passengers leaving the UK. In accordance with Excise Goods (Export Shop) Regulations(ESR) r 8(4) duty free stores who after 1 July 1999, became known as export shops may treat the sale of goods to passengers intending to take them to non-EU destinations as zero rated exports, provided they retain transport documentation.
The legal basis for specifying the type and description of a transport document can be found in Regulation 8(4) of the Excise Goods(Export Shops) Regulation 2000 which encompasses a boarding card.
Conversely, in VAT law there is no obligatory requirement for the production of a boarding pass to purchase goods in airport retail shops. However without such evidence the supply cannot be zero-rated as an export.
The problem arises in circumstances where a passenger is purchasing items which are advertised as tax free, and the 20% saving, is not passed on to the customer. By way of an elementary example, where an item, costs £5, a retailer can reclaim £1.00 from HMRC if it is sold to a passenger travelling outside the EU. Rather than cutting the cost of the product, it is retaining the difference. According to HMRC and airports this is a widely accepted practice for retailers within airport terminals.
Consequently, airport retailers have been accused of utilising information from passengers boarding cards, to claim a sizable sum of VAT back without imparting the VAT relief they receive to customers. Whilst there is no suggestion that any retailer is breaking the law in reality the passengers flying outside the EU should be the ones making these savings. Some retailers are offering small reductions in their airport outlets, but they are still retaining the monster share of the gleanings.
Up until now passengers have been under the illusion that the production of their boarding pass was a legal obligation. They have been affronted on the detection that this is not actually the case. The reality is that the production of the boarding card merely helps companies claim back VAT. The aggravation appears principled by nature and the lack of transparency on airport prices appears to underpin the public's reaction.
From a shoppers view point the issue is simple. If the airport shops are not paying VAT on purchases made by passengers leaving the EU, then they should be passing those savings on.
Public reaction has been reinforced by a number of government ministers who have urged all airport retailers to use the available relief for the benefit of their customers.
At present the future position is unclear and continues to unfold. However, the strength of the public's reaction will in all likelihood lead to a wider investigation being conducted with retailers being forced to examine their current pricing systems and structures. The desired result of which should see retailers handing back some of the reclaimed VAT to shoppers.