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.

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.

Category

General

This article is closed to new posts. Discussion continues in the HfP Forums.

Thywillbedone says:

16 Sep16 September 06:52

I’m all for personal freedoms (and saying this as an ex-smoker) but tobacco has to be one of those habits that the Government should be doing their utmost to discourage – a complete negative from a societal perspective. Who are they hoping to cheer on with this policy? Or is it because alcohol and tobacco are always considered together in the budget?

Regarding scrapping the VAT refunds, doesn’t seem like a smart move. Underestimating the pull to high spenders of getting a modest refund back on their splurge.
- Nick_C says:
  
  16 Sep16 September 07:12
  
  This could be a massive boost for airlines and the wider travel industry.
  
  Carriers used to make significant profits from on board sales. These sales made some routes profitable which were no longer viable once duty free ended.
  
  This will give Eurostar a new revenue stream.
  
  The booze cruise will still be attractive. Might we even see a Scandinavian route reopen? Reopening Newcastle to Bergen would be good for the North East and make road haulage to Norway and Sweden economical again. Good for the environment.
  
  Overall, I see this as a positive move.
  - John says:
    
    16 Sep16 September 07:28
    
    I wonder what the UK approach to customs checks at St Pancras will be
    
    See also discussion here: https://www.railforums.co.uk/threads/duty-free-to-the-eu-is-back.209127/
- Alan says:
  
  16 Sep16 September 07:54
  
  Totally agree re tobacco, ludicrous decision – they should be scrapping tax free for it.
  - Lady London says:
    
    16 Sep16 September 13:40
    
    they should be increasing tax on tobacco in particular. And Swedish-style taxes on spirits
    - illuminatus says:
      
      16 Sep16 September 15:05
      
      And Swedish-style taxes on spirits – NO
NigelthePensioner says:

16 Sep16 September 06:52

What about purchases at Cartier, Tiffany and Watches of Switzerland in T5 at LHR…?
- Andrew says:
  
  16 Sep16 September 06:58
  
  Unless the retailer decides to pay the VAT on behalf of all customers, which they currently do for those travelling within the EU, then the prices will revert to RRP and the shops will close as there is no USP. These brands have huge advertising budgets though and so they may decided that the shops at LHR are effectively that – a place where people can browse whilst bored, have brand awareness and at another time buy the watch at home.
- Rob says:
  
  16 Sep16 September 08:53
  
  Full price now
  - Andrew says:
    
    16 Sep16 September 09:28
    
    They can still choose to discount – Cartier and Tiffany offer tax free prices to all passengers, WoS I think only offers to non-EU. For Cartier and Tiffany, they can choose to continue to offer tax free prices to all and absorb the VAT which they do for a high proportion of customers anyway. I bought a Cartier watch last year when flying to Edinburgh and so Harrods (who operate Cartier at T5 and T3) would have paid the VAT on my behalf – that can continue.
    - Rob says:
      
      16 Sep16 September 11:16
      
      Factor in Heathrow’s massive cut (30%?) of the revenue and it’s difficult to see that carrying on.
Andrew says:

16 Sep16 September 06:55

I don’t agree with Rob’s assumption that everyone shopping at LHR is doing so for the convenience and don’t care about the VAT saving. Most people will be shopping at the airport to save money, if they aren’t saving money, most will not buy it there.
- Mark says:
  
  16 Sep16 September 08:10
  
  +1. I was looking at an Omega Seamaster last year through Ernest Jones which was on sale at the time, and the 20% VAT saving stacked on top of this sale price at the Gatwick store. On top of that my employer had a discount portal where I could buy Ernest Jones gift cards with a 10% discount, so in total I was saving around 40% of the RRP.
- Andrew says:
  
  16 Sep16 September 08:37
  
  *or* they have the “we’re on holiday so let’s buy it” mentality (been there, done that) which won’t be impacted in a major way by the imposition of a, say, 10% net price rise.
- Rob says:
  
  16 Sep16 September 08:52
  
  I know how often I have the time to visit Prada, Smythson etc normally.
  
  I haven’t even been in Harrods since it reopened, except for a meal, and I walk past it five days a week.
  - Andrew says:
    
    16 Sep16 September 09:29
    
    I thought you said you went to Harrods to buy a toaster with the Amex offer in July Rob?
    - Rob says:
      
      16 Sep16 September 11:15
      
      True, I did buy the toaster – this was under orders from my wife and I went straight to kitchenwares, bought it and left! What I meant to say, but didn’t want to type out in full, is that I haven’t been in to spend a lazy couple of hours wandering around menswear since it reopened.
    - KBuffett says:
      
      16 Sep16 September 11:24
      
      LOL! Rob gets plenty of stick on here.
    - Lady London says:
      
      16 Sep16 September 13:43
      
      Probably had it sent. Harrods used to do free local deliveries of literally anything – even one egg – in suitable postcodes.
- Kim says:
  
  16 Sep16 September 19:15
  
  +1 and there is a whole slew of buyers who purposely purchase from the airport because of the savings. It’s such a big market that Heathrow has their own personal shopping service and services like shop and collect to cater to these shoppers and encourage further shopping
BS says:

16 Sep16 September 07:01

I wonder if this is a play by the government – say this to get retailers to agree to pass full VAT savings on to the customer. Or no one gets anything.
- ChrisC says:
  
  16 Sep16 September 07:20
  
  Well as far as VAT goes no one is getting any reduction at all now unless the (high street) retailer sends it directly to your non U.K. home which will likely only work for a few high end retailers.
  
  This is the result of a consultation and not the government raising a ballon to see what reaction it gets
Bob says:

16 Sep16 September 07:02

The West End was already struggling from lower domestic footfall because fewer people want to take public transport to the shops and fewer are working in zone 1 London now. It’s not just luxury brands – e.g. the queue for VAT refunds in John Lewis on Black Friday was substantial. I can’t see those big shops surviving.
Mike says:

16 Sep16 September 07:03

VAT refunds being scrapped for tourists – will really effect Bicester Outlet Centre
- John says:
  
  16 Sep16 September 07:22
  
  Depends on how badly the pound does?
  - Nick_C says:
    
    16 Sep16 September 08:01
    
    Precisely. The crash in the value of Sterling is far more significant than the loss of Duty Free shopping. And is more beneficial to tourism than Duty Free shopping as hotels, restaurants, theatres etc are all now cheaper for tourists.
    - TGLoyalty says:
      
      16 Sep16 September 09:15
      
      The Euro has seen a similar crash and Milan still offers vat reclaim. Why is London still better than Milan for shopping tourists?
      - Lady London says:
        
        16 Sep16 September 13:50
        
        Milan, Paris and other European capitals dont have the comprehensive spread of goods London does.
        
        Shopping used to be my hobby so I know.
        
        Milan is good for fashion, probably the best. Paris upper-middle to high end mostly, unless you are into stylish cheap bits that dont last. Paris is exceptional for beauty though.
        
        London has pretty much everything. For homes, for example.
        
        You just dont find the same choice of different types of item at all levels other than in London amongst major European destinations.
  - Kim says:
    
    16 Sep16 September 19:20
    
    The brands will be quick to increase prices when the £ crashes. It has been done this year even during the lockdown specifically brands like Chanel and Louis Vuitton
- Lady London says:
  
  16 Sep16 September 13:53
  
  The company that owns Bicester does have well spread investments in other countries though.
The Lord says:

16 Sep16 September 07:13

Got to pay for 2020 somehow. Easier to swallow that most other potential tax rises for most
- Andrew says:
  
  16 Sep16 September 07:21
  
  But if no one is shopping in the U.K. because it’s no longer attractive it doesn’t raise any revenue – 20% of nothing is still nothing.
  - The Lord says:
    
    16 Sep16 September 07:45
    
    Need to look at this as a wider reform of VAT exemptions not something that is just being targeted at shoppers. Apparently HMRC tightening up across the board
    - TGLoyalty says:
      
      16 Sep16 September 09:21
      
      I agree however if you only focus on the direct forms of taxation like VAT on shopping
      
      You miss the indirect forms like VAT on their Hotel and F&B spend. The additional profits the hotels and F&B outlets makes and pay taxes on etc the lower cost of u employment as these places hire more staff to cope with occupancy.
      
      I’m hoping someone has done the calculations on how many tourists would walk away and the net impact on HMRC coffers but I really doubt it.
      - Rob says:
        
        16 Sep16 September 09:25
        
        VERY unlikely. If this were true, for example, you would see more support for West End theatres, given how much incidental spend they generate via hotels, restaurants, car parking, shopping, baby sitting etc etc.
- Lady London says:
  
  16 Sep16 September 13:52
  
  Like, smoking ourselves to death and getting drunk will distract us from the real issues.
- cinereus says:
  
  21 Sep21 September 16:48
  
  Except the net gain will be negative.
Duncan Orr says:

16 Sep16 September 07:14

What about perfume, will this now be + VAT as well?
- Andrew says:
  
  16 Sep16 September 07:20
  
  Yes, but the prices offered by World Duty Free were only a slight discount on the high street price and they can continue or offer that discount if they wish, as any high street retailer is free to.
  - Anna says:
    
    16 Sep16 September 08:51
    
    I stopped buying perfume on holiday a few years ago as even the Caribbean duty sellers can’t compete with the discounts you can get in the UK now. I generally get frangrance sets from Debenham’s when there’s a sale on, these are often 30% – 50% off and much cheaper than just buying the perfume on its own.
    - Lady London says:
      
      16 Sep16 September 20:09
      
      Selfridges and Harrods used to be good hunting grounds at the right time of year too. And Liberty used to come up with all sorts of interesting offers, they are excellent at digging out interesting brands before they go mainstream.
  - Alex says:
    
    16 Sep16 September 10:09
    
    I have found my usual perfume is cheaper in Boots online compared to most airports in the EU, but I haven’t checked Heathrow recently. I keep an eye for the weekends where you get extra points and buy then. Boots’ 4% back in points is already one of the best in class.
  - Andrew says:
    
    16 Sep16 September 10:16
    
    The shelf price at WDF is just the presentation price.
    
    In normal times, I’m on domestic flights at least once a month, so the girls in the office here ask me to check prices and pick smellies and make-up up at the airport for them if it’s below a set level (or if I have WDF offers).
    
    I’ve regularly found myself being sidled up to by WDF staff with a quiet “buying for someone special Sir?” and being offered a much better price for an immediate purchase. Just to be clear, it does go through the till!
- Rob says:
  
  16 Sep16 September 08:50
  
  Seems so, yes
  - KBuffett says:
    
    16 Sep16 September 11:29
    
    That’s interesting, I didn’t know you could ‘hustle’ with WDF.