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Government bans sale of Duty Free electronics and clothing from January

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The Government has published its new rules for duty free and tax free sales from 1st January 2021.

It is likely to cause significant problems for many retailers, and we may see the end of Dixons Travel and many clothing shops.

Dixons Travel to close following UK duty free changes

The good news for smokers and drinkers ….

There will be no duty charged on alcohol or tobacco products from January 2021. This applies irrespective of whether you are travelling to an EU or non-EU country.

This saves you:

  • £2.23 on a 75cl bottle of wine.
  • £2.86 on a 75cl bottle of Champagne or Prosecco.
  • £2.28 on six 50cl cans of 4% ABV beer.
  • £11.50 on a 1l bottle of 40% ABV spirits.

…… although I don’t know how many people really stock up on cans of beer at Heathrow to take to their holiday destination.

This applies to ports, airports, international rail stations and sales on ships, trains and planes.

The new personal limits on what you can bring home are covered below. Again, this applies to both EU and non-EU arrivals. You will, for example, be able to bring back three crates of beer without paying any duty. Good luck fitting that into the overhead locker.

The bad news for people who like ‘stuff’ you can’t smoke or drink ….

The Government is ending all other tax free sales from January 2021.

VAT is currently charged on goods taken into the EU but not on good taken outside the EU.

To make it easier for stores to price goods, they have generally set a blended price. A jumper which would be £100 if taken into the EU or (£100/6×5) £83.33 if taken outside the EU is sold for £90ish to everyone. If the customer is travelling to the EU, the shop quietly pays the VAT for them.

The Government was unhappy that customers travelling outside the EU were not getting the full benefit of the VAT saving. The saving has therefore been abolished.

All clothing, electronics, toys etc purchased at UK airports from January 2021 will include VAT and will presumably be sold at standard retail prices.

New UK duty free rules from 2021

VAT refunds are being scrapped for tourists

People leaving the UK to return home will no longer be able to reclaim the VAT they spend on items in the UK. This is likely to have a major impact on London shops which rely heavily on sales to non-EU visitors who can reclaim the VAT on exit.

The only exception is when an item is shipped directly from the seller to the home address of the customer.

Coming into the UK?

Here are the new inbound duty free allowances for people entering the UK:

Alcohol

  • 42 litres of beer
  • 18 litres of still wine
  • 4 litres of spirits OR 9 litres of sparkling wine, fortified wine or any alcoholic beverage less than 22% ABV

Tobacco

  • 200 cigarettes OR
  • 100 cigarillos OR
  • 50 cigars OR
  • 250g tobacco OR
  • 200 sticks of tobacco for heating
  • or any proportional combination of the above

Any other goods

  • £390 or £270 if travelling by private plane or boat

Conclusion

I’m not sure that subsidising smoking and drinking at the expense of clothing and electronics is a massive vote winner, especially amongst the young.

I don’t see any major changes to the shopping line-up at Heathrow, except potentially for a new monster sized cigarette shop. The core customers in the expensive boutiques are usually busy people who don’t have time to visit Harrods or Bond Street during the week, or tourists buying items they cannot find at home. Removing the VAT saving won’t make a major difference.

We may see the end of Dixons Travel. Buying a new iPhone at the airport and then having to keep it safe during your holiday isn’t worth the trouble if it doesn’t save you any money. The profit margin on IT equipment is often very low and Heathrow rents are very high.

I would also guess that stores at other airports with a less affluent customer base will suffer. Many of those stores do rely on value seekers rather than convenience seekers, and the value will no longer be there.

You can find out more about these changes on gov.uk here.

Comments (260)

  • TimM says:

    A quadrupling of the duty-free spirits allowance is significant. Dixons has been a waste of space since they abandoned the VAT saving – online prices have always been lower.

    It will now be well-worth taking that £17 return Ryanair flight just to stock up on Spanish brandy. #Valueseeker

  • Ian says:

    Allowing tourists to reclaim vat always seems nuts to me. Does anyone know how much this is going to raise?

    Luxury shops and Selfridges will not be happy, VAT reclaims are a massive part of their business.

    • Simon says:

      We will be the only major tourist destination to not allow this making us significantly less attractive as a destination for tourists and having a major adverse impact on uk london retail.

      • Dominic Barrington says:

        The USA does not do it!

        • ChrisC says:

          Canada used to but stopped about 10 years ago for general tourists.

          • Blenz101 says:

            Will also have an impact on ex-pats who used to enjoy returning home and shopping luxury brands at a discount. Speaking as a member of the already tax free Dubai set!

            I wonder if places like Bicester Village will suffer. Will it still be a Mecca for Chinese luxury tourists if suddenly everything increases by 20%?

          • Ian says:

            Yep, i always did a shop before flying to HK. The savings are always a bit rubbish though, as everyone takes a cut.

            Agree, luxury shopping is going to be severely impacted.

            Another anti business move by Bojo. Embarrassing.

          • Dev says:

            How much of that was true VAT savings is passed onto the average overseas punter … especially when you calculate the exorbitant Travelex “Admin” fees that eat into your savings. You would have to spend thousands to make the admin fee a low percentage of the savings.

          • Lady London says:

            People did spend thousands. even tens of thousands in London high end retail. The big name department stores had this business as a mainstay.

            With retail in such trouble, and bricks and mortar retail a historical strength in the UK this does not make sense.

            Unless the EU got to BoJo worried about EU consumers from every country taking cheap flights here to shop next year rather than paying VAT in their EU home countries.

            I’m wondering does this mean such schemes being removed all over Europe or at least will they all exclude Brits. Otherwise this does not make sense for the UK.

          • Alan says:

            Although GBP pretty weak which will probably still offset.

        • Relaxo says:

          The USA dosent need to do it as prices for almost all retail goods are cheaper than elsewhere in the world.

          • lcylocal says:

            The USA does do it in a limited way. Certain states offer it – sometimes at a specific mall. Added to that states like Oregon that have no state sales tax anyway.

        • Adam says:

          Some states have the own schemes. Louisiana for example.

        • Nick says:

          I’ve done it in Texas, can’t speak for the rest of the US, but it definitely does exist.

        • Anthony says:

          The USA does in two states, I can’t remember the other one but Texas is one. Saved a fortune there

          • Anna says:

            You’ve just reminded me of the time we visited family friends in Texas in the 90s and shopping at a small mall near the Mexican border where we didn’t have to pay sales tax – we were the first English people the sales assistant had ever met!

        • Jonathan Price says:

          You are not correct. Most US states allow you to reclaim sales tax when you fly out. I did it last year from Louisiana.

    • Sapiens says:

      Ending the VAT Reclaim regime is a MASSIVE change for the UK tourism industry, regarding high spending Asian tourists.

      I hope the government has thought this policy through as it will directly lead to thousands of job losses pretty much instantly.

      • Relaxo says:

        Do you honestly believe this government is capable of thinking anything through?

      • John says:

        Many things are still cheaper than in Asia even with VAT

      • Kim says:

        Even with the admin fees, you can get a maximum 14% VAT refund. That is massive.. like £280 discount for something worth £2000. Makes it more appealing for tourists if shopping in brands that do not offer any discount like LV, Hermes, and Rolex.

  • Andrew says:

    For airports other than LHR there will probably be less impact as most customers were already flying within the EU and therefore the retailer was paying the VAT on your behalf and absorbing the loss, which they can continue to do – that’s why they ask for your boarding pass when paying. BHX for example has very few non-EU flights. Airport retailers can continue to offer a USP of lower prices – Debenhams on the high street is free to discount its fragrances and airport retailers will be the same. The significant change will be to the London and Bicester designer shops which have traditionally relied on non-EU customers who claim back the VAT and without a 20% ish discount, could stop shopping in the U.K. – so whilst it stops all that VAT leaving, 20% of nothing is still nothing and will cost many jobs if shops no longer find London viable. Oh and the end of Travelex which administers (for a fee to the customer) the VAT refund service – and let’s face it, who visits a Bureau de Change before travelling either anymore.

    • Niel says:

      The vat claim does not offer the full 20% cut. Only up to 14%, depending on the amount of transactions and the rate is calculated separately for individual transaction.

  • ChrisC says:

    So the government doesn’t like non eu destination passengers not getting all the VAT savings so it decides to abolish the savings full stop so instead of getting some savings they will get no savings?

    Not sure of the logic of that other than it raises some revenue for the government.

    Can’t they have two prices with clear labels (like they have now for some booze items with EU and non EU prices) and only give the savings – in a specific and limited way – to those with a proper boarding pass for a non EU / domestic destination?

  • Simon says:

    The end of shopping trips to Calais then. Not worth a day trip just to bring back 2 cases of wine.

    • TimM says:

      Levelling down – it has never been worth a trip to Calais for most of the UK to buy cheap booze.

      • Dev says:

        Tesco multi-buys … 3 crates for £24 is decent value!

      • Jonathan says:

        It was worth it if you look at around 15-20 years ago. Back in the early days of booze cruise, there were some good savings to be made, then everyone became wise to it !

    • TGLoyalty says:

      What did you expect would happen when the uk voted to leave the EU?

      • MD says:

        Come on TGL, did you honestly expect them to end duty free purchases if travelling to NON EU countries because of Brexit? Ah, Brexit, the gift that keeps on giving.

        • TGLoyalty says:

          No but I expected them to stop booze cruises to Calais as per the OP’s post

          • MD says:

            Fair enough. But the whole “we don’t like the fact that travelling to the EU gets you a discount, therefore nobody gets a discount now” logic of this is beyond absurd.

    • Brian says:

      “The end of shopping trips to Calais then.”

      This assumes a no deal outcome. There will probably be an FTA (eventually) with no duty on wine… so you would declare and then pay nothing.

  • Edward says:

    Is the government daft or just want make to make the UK less and less competitive? Not being able to Claim the VAT Back for tourists will be a huge blow to retailers. I know some luxury brands on Bond Street that makes 70% of their revenue from international clients, that’s why companies like global blue have a private lounge near Bond Street for the VAT refunds. I can guarantee all the tourists will just head to Eu countries for their shopping instead.

    • Jonathan Price says:

      We don’t want nasty foreigners here, haven’t you heard? We left the EU so we didn’t have to have them working here, so the logical next step is dissuade them from visiting too.

  • Lynsey says:

    Damn, I was saving up my Heathrow rewards to swap to vouchers and combine it with the tax free prices at Gucci for a nice little treat! Thanks to lovely Covid it’s unlikely I will be at Heathrow before 1st January. Should have just done it a while ago but was waiting on the off chance they would do a promotion on converting again – lesson learnt – don’t wait!

  • Neil says:

    I’m much more concerned about a 24 bottle limit on (table) wine brought back via Calais. Au revoir to Cellar door purchases in France… 🙁

    • Andrew says:

      Those are the limits for duty free. What difference (if any) would there be to wine on which French taxes had been paid (as now)?

      • Nick_C says:

        Those are the limits on importing alcohol into the UK, regardless of whether you bought that alcohol in a Duty Free shop or in a supermarket.

        • Anna says:

          No – these are the limits without paying duty when you return to the UK. Theoretically anything over that you will have to pay duty on, but unless HMRC is going to get a significant boost in resources, I can’t see much enforcement going on.

          • Andrew says:

            I can vaguely recall from the pre-common market days that provided the cigarettes or alcohol were genuinely for personal consumption there was no limit on the amount you could bring in provided the appropriate tax/duties had been paid at source.

            Every now and again there’d be a news story of a van driver at Dover arguing with a customs official about how the 200,000 cigarettes in the back were all for him.

            Is that just wishful thinking or was it real?

          • Nick_C says:

            The personal consumption guidance came in when EU Duty Free was abolished in 1999. In theory, there is no limit to the amount of goods you can move around within the single market.

            The Duty Free limits were always theoretically strict, although Customs Officers were often lenient. My mother used to smoke Salem Cigarettes, which you couldn’t buy in the UK. I brought two cartons for her on one trip back from the US and went through the Red Channel. The Officer asked me if I had anything else (I hadn’t) and didn’t collect the duty. Not worth the effort for a small amount I guess.

          • Nick_C says:

            We are saying the same thing Anna. I didn’t want to over-use the expression “Duty Free” because it seems to cause confusion.

            You can import as much alcohol as you like, but if you bring in more than four litres of spirits you must pay duty on the excess, regardless of where it was bought.

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