George Osborne launches VAT probe on airport shops
Chancellor George Osborne has announced a review of airside sales to ensure shops are passing on Vat savings to customers.
The "extensive" review will make sure travellers are receiving the savings from Vat relief and will also cover all other airport shopping taxes.
As thousands of travellers pass through airports for New Year's holidays, George Osborne said some airside retailers were currently keeping up to an estimated 50p of every £1 of potential Vat savings instead of passing them on to shoppers. It's expected to be completed by early 2016 and will look at ways to ensure prices reflect Vat savings and savings on duty.
Mr Osborne said: "For families flying out of the UK for a winter getaway, airports should be the ideal place to pick up a bargain.
"Vat relief at airports is intended to cut prices for those travellers - not be a windfall gain for shops.
"But many people could be paying over the odds for their purchases because the Government's Vat concession isn't passed on.
"This is simply unacceptable. I have launched a review to make sure that this Vat relief benefits those it's intended for - consumers - whatever time of the year they are travelling."
Mr Osborne's announcement comes more than four months after the Treasury urged retailers to cut their prices at airports to reflect Vat discounts they receive for travellers leaving Europe amid claims that some stores were using the relief to boost their profits.
The Independent revealed that many airport stores were asking passengers to present boarding cards when making a purchase.
The information on the cards is then used to claim Vat relief on sales to travellers leaving the European Union.
The practice means retailers do not pay 20% Vat on goods they sell to customers travelling outside the EU.
It is not a legal requirement for passengers to show their boarding cards when buying supposedly duty-free goods.