UK. British Chancellor of the Exchequer Sajid Javid announced last night that duty free for travellers bound to European Union (EU) countries would return if the UK leaves the trading bloc without a deal.
“As we prepare to leave the EU, I’m pleased to be able to back British travellers,” Javid said in a statement.
“We want people to enjoy their hard-earned holidays and this decision will help holidaymakers’ cash go that little bit further.”
British Prime Minister Boris Johnson has pledged to take Britain out of the EU with or without a deal on 31 October.
The Chancellor’s statement, if implemented, would mean a full return for duty free sales in both directions between the UK and EU countries. However, to the disappointment of the UK industry, VAT will not be removed from all categories sold airside, as the UKTRF noted in a statement.
UKTRF President Francois Bourienne said: “We welcome today’s announcement by the Government confirming the removal of duty and tax from alcohol and tobacco products for passengers travelling from the UK to the EU in the event of a no-deal Brexit. The industry has been campaigning for fair and sensible changes to the UK’s duty free structure for an extended period of time, and it is pleasing to see the Government provide the certainty our industry needs to prepare for a no-deal Brexit.
“While these changes are a positive first step, however, we remain very concerned that the Government has declined to also remove VAT from other product categories available airside.
“With the EU already clearly signalling its intention to remove duty and tax from all airside products in the event of a no-deal Brexit, UK airports and retailers will be put at an immediate and significant competitive disadvantage against European competitors.
“We encourage the government to urgently review its decision not to remove VAT from other product categories, before UK airports and retailers are thrown into an inequitable and disadvantageous position the day after Brexit.
“Independent economic analysis has shown the duty free sector could contribute up to £900 million to the UK economy after Brexit, as well as generating approximately 9,300 new jobs. We welcome any opportunity to work constructively with the Government in the coming days and weeks to ensure the UK’s travel retail sector is able to compete and succeed, and continue to make a significant economic contribution up and down the country.”
As reported, the European Commission confirmed on 4 September that duty and tax free sales to UK-bound passengers would be permissible from member states on 1 November in the event of a ‘hard Brexit’. Commenting on that development, the European Travel Retail Confederation noted the same day that it was unclear whether the UK would mirror these rules for EU-bound travellers. The UK government must first pass legislation to ensure a return to a duty free regime for outbound travellers, the ETRC noted.
Javid’s statement, an apparently populist move to help drive public support for Brexit, including a no-deal scenario, paves the way to solving that problem (if the VAT question is also addressed).
Irish Finance Minister Paschal Donohue confirmed that duty free shopping would return between ports and airports for travellers going from Ireland to the UK, though he ruled out any border duty free sales between Northern Ireland and the Republic.
He said: “As the UK has today decided to apply an unrestricted duty free scheme in the event that the country leaves the EU with no deal, in line with the reciprocal policy, European Union rules in relation to passenger travel from ports and airports between the EU and third countries would apply from 31 October. In effect this would mean that Excise and VAT free sales on purchases of tobacco and alcohol made at duty free shops, subject to quantitative purchase limits, would therefore operate between Ireland and the UK.
“The UK Government announcement on duty free shopping does not apply to passenger travel on the island of Ireland, between North and South and there will be no duty free regime for passenger travel between the two jurisdictions on the island. This policy is in compliance with EU law and Ireland’s international obligations.”
Minister Donohoe added: “The effect of the announcement by the UK Government today on the return of duty free shopping between the UK and EU Member States means that Ireland in respecting our international obligations will, as intended, reciprocate the UK Government’s decision and facilitate duty free purchases for passengers travelling from Ireland to UK ports and airports. Passengers to Ireland purchasing duty free goods in the UK must adhere to the personal consumption limits set out in EU law.”
However, the prospects of a no-deal or hard Brexit have receded markedly in recent days, thanks to powerful and unified opposition to the move from rival parties – and some members of Prime Minister Boris Johnson’s Conservative government.
Under current UK law, Britain will exit the EU on 31 October, regardless of whether a withdrawal deal has been agreed with Brussels. But new legislation, granted royal assent on Monday, changes that. It will force the Prime Minister to seek a Brexit delay to 31 January 2020 unless a deal or a no-deal exit is sanctioned by British MPs by 19 October.
Both scenarios seem increasingly unlikely, although Prime Minister Johnson has vowed to press on with negotiating a deal with the EU, while “preparing to leave without one”.
The return of duty free will only apply if Britain leaves the EU without a deal. Under the terms of the withdrawal agreement struck by former Prime Minister Theresa May, the UK would stay in the single market and the customs union for a transition period – meaning no duty free shopping in either direction.
