UK/EUROPE. Twenty years and six months since intra-European Union duty free shopping was abolished, it made a return for travellers between the UK and EU member states on 1 January 2021.
A transition period that followed the UK’s earlier departure from the EU ended on 31 December, 2020, clearing the way for the new rules to be introduced the next day.
The new regulations, however, are a mix of the good (the return of duty free shopping on liquor & tobacco in either direction); the bad (the removal of the tax free allowance for travellers departing the UK); and for many British retailers at least, the ugly (the near elimination of the VAT Retail Export Scheme – refunds are now only granted if purchased items are shipped directly abroad and are not transported in a person’s luggage).
The good: Duty free shopping returns for passengers travelling between the UK and the EU
Travellers departing England, Scotland and Wales for EU countries can now purchase duty free liquor & tobacco.
According to the European Travel Retail Confederation (ETRC), the EU allowances are as follows:
- Alcohol: a) 4 litres of still wine; and b) 16 litres of beer; and c) a total of 1 litre of spirits over 22 % vol. OR 1 litre of undenatured alcohol (ethyl alcohol) of 80% vol. (or over) OR 2 litres of fortified or sparkling wine.
- Tobacco: 200 cigarettes OR 100 cigarillos OR 50 cigars OR 250 g tobacco;
- Other goods up to a value of €300 per traveller or €430 for travellers by air and sea [however, this is the EU allowance; see next section for the scrapping of the tax free allowance for travellers departing from the UK]
The allowances for passengers ENTERING THE UK are:
- Alcohol: a) 18 litres of still wine; and b) 42 litres of beer; and c) a total of 4 litres of spirits and other liquors over 22% alcohol OR 9 litres of fortified wine (for example port, sherry), sparkling wine and alcoholic drinks up to 22% alcohol
- Tobacco: 200 cigarettes OR 100 cigarillos OR 50 cigars OR 250 g tobacco OR 200 sticks of tobacco for heating.
- Other goods worth up to £390 (or up to £270 when arriving by private plane or boat). If a single item IS worth more than the allowance, duty or tax must be paid on its full value, not just the value above the allowance.
Northern Ireland (part of the UK), however will operate under EU single market rules, meaning no duty free allowance for travellers to the EU (or other UK destinations).
The bad: Tax free sales scrapped for UK passengers bound for EU states (and anywhere else)
Despite a vociferous and broad-based campaign to rescind the measure, the British government scrapped tax free shopping for passengers leaving the country (to any destination including the EU), also effective 1 January. Industry campaigners have warned that in London airports alone, the combined impact of COVID-19 and the removal of the VAT airside exemption will result in losses of over £1 billion in operating profit and threaten thousands of jobs. The government decision is still being challenged.
The ugly: VAT refund changes mean crippling blow for UK retailers selling tax free goods to international visitors
From 1 January, the VAT Retail Export Scheme, which previously offered VAT refunds on landside sales of goods to non-EU travellers, has been scrapped, other than if goods are shipped directly abroad (i.e. separately from the traveller). Analyst Global Blue has calculated that the move will end up costing the UK economy £6 billion (US$8.2 billion) a year in lost tourist spending.
Retailer reaction: EU retailers promote new shopping opportunity for UK-bound travellers; World Duty Free vows to maintain saving on majority of previously tax free categories in the UK
In updating the allowance information on its UK shopping web page, Dufry-owned World Duty Free noted: “On product categories including Beauty, Food, Sunglasses, Watches, Jewellery and Souvenirs, which are not duty free products, we have always offered great year round value; which we intend to widely maintain. From 1st January 2021, the UK Government has removed the benefit of VAT relief which allowed tax free sales on goods purchased in UK airports.
“However, as far as possible we want to continue to offer the same value that we have previously (up to 31 December 2020) been offering to all our customers across these product categories. Therefore, the majority of these products will continue to show a 20% saving versus the UK average high street price and we will still offer some of the more popular fragrances at 40% saving versus the UK average high street price. However, as with any retail business, our ability to do so will be determined by a number of factors (e.g. cost price, rents, price increases in domestic market etc).”
