All Dixons Travel stores to close after ban on tax free shopping

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All Dixons Travel branches in UK airports are to close. The announcement was made this morning by parent company Dixons Carphone.

The closure was blamed on the ban on tax free airport shopping, which took effect on 1st January 2021. Following the end of the Brexit transition process, the Government had to choose between allowing tax free shopping when travelling to EU countries or banning it entirely. It chose the latter.

(The Government has also banned VAT reclaim for tourists leaving the UK, much to the chagrin of London’s luxury retailers. They face losing substantial sales to foreign tourists who may now find goods cheaper elsewhere. That said, you may or may not agree that letting foreign tourists reclaim £833 of VAT on a £5,000 handbag was a great idea in the first place.)

There are currently 35 Dixons Travel shops. As well as the UK airport stores, it is present in Ireland, Norway and on two P&O cruise ships. All will close.

The chain had historically made “over £20 million per year” in profit. It shows the remarkable profitability of airport shopping despite the high rents charged by UK airports.

It remains to be seen how many other retailers now pull out of UK airports. Whilst tax free pricing did encourage sales, many travellers – especially at Heathrow – shopped purely for convenience. These sales should be secure irrespective of whether VAT is charged. Most stores operate on turnover-based rents which gives them protection against lower sales.

The Airport Operators Association said in a statement:

“Amid the devastating impacts of the Covid-19 pandemic, the UK Government’s decision to remove airside VAT-free shopping as of January 1, 2021 is making a bad situation worse. The Government should urgently review this decision and reverse course before further damage is done.

The UK is now the only country in Europe without airside tax-free shopping. Our European competitors get a Brexit benefit by being able to offer UK-bound travellers every opportunity for tax-free shopping while UK airports are left at a significant disadvantage.

The closure of Dixon Travel stores and the loss of jobs shows the first real-world consequences of the Government’s inexplicable decision. These are unlikely to be the last.

As a tentative restart of aviation draws closer, Government should be supporting revenue recovery for airports after the huge losses suffered by airports during the pandemic. Instead, the Government has left airports with one hand tied behind their back in the efforts to return to profitability.”

The full press release from Dixons Carphone is here (PDF).

Category

General

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

Blenz101 says:

28 Apr28 April 12:13

Airport tax free shopping for electronics and luxury goods was very popular with all the expats I know here in Dubai.

Non U.K. tax residents returning home to see friends and family enjoyed being able to claim the VAT back.

I suspect expats in other high income / low tax environments enjoyed the same benefit when visiting “home”.
NFH says:

28 Apr28 April 12:15

Hopefully this will free up retail space in UK airports for more booze duty-free shops, which would increase competition. There’s very little competition for this in UK airports, which leads to high prices, often with so-called duty free prices at double the supermarket price before VAT and duty. This is in contrast to airports such as MSQ where there’s lots of competition and cheaper prices away from the main thoroughfares.
- Nick says:
  
  28 Apr28 April 12:55
  
  HAL takes a % of turnover on WDF sales. There’s very little incentive for them to create competition in their (very private) marketplace.
  - Lady London says:
    
    28 Apr28 April 13:01
    
    If they’re anything like Harrods they will be taking rent as well as quite a tasty % of turnover.
- Crafty says:
  
  29 Apr29 April 10:29
  
  There’s no competition, because the airport sells the rights to operate the shops in its terminals to one operator, or one per category. Competition you see is illusory because it’s among concessionaires of a single retail operator.
bafan says:

28 Apr28 April 12:34

I bought an iPad and an Apple Watch in T5…good cost savings (it was £40 on the Watch plus Heathrow Reward points) but the staff didn’t know much IIRC.
Gareth says:

28 Apr28 April 12:37

I’ll miss this. For some items, it was worth it to book a domestic flight just to be able to benefit from then discount funded by travellers flying ex-EU that didn’t pay VAT. I bought a MacBook Pro on a LHR->MAN leg after a holiday – and paid about £250 less with VAT still included (non-reclaimable on that leg). I still have a stash of Heathrow Reward points on top still.
Alex says:

28 Apr28 April 12:41

Can someone please explain how this works/worked? Is it applicable to all countries including EU?
- Blenz101 says:
  
  28 Apr28 April 12:47
  
  Here is the old guidance …
  
  https://www.gov.uk/guidance/claim-vat-back-on-tax-free-shopping-in-the-uk-notice-7041
  - Alex says:
    
    28 Apr28 April 12:59
    
    Thank you Blenz.
Lady London says:

28 Apr28 April 12:46

It’s not clear why “the Government had to choose between allowing tax free shopping when travelling to EU countries or banning it entirely.”

Other countries have duty-free when travelling from them all around the world. Surely the UK would have been just as free – and just as sensible – to choose this option?

Banning personal export VAT discounts and now duty free is pretty much the most serious “own goal” I’ve seen the UK do in the past 2 decades. Unless you count Brexit and the mess they made of customs and duties and VAT whilst lying they got a deal. Boris’s own version of Neville Chamberlain’s “peace in our time” speech when he claimed to have an agreement on 24th Dec 2020 when it seems practically nothing has been agreed.
- Tim says:
  
  28 Apr28 April 12:56
  
  Isn’t this part of wider sales tax changes that the U.K. implemented at the same time as Brexit as it made sense to do so and EU countries have delayed? A global move towards preventing sales tax evasion? Nothing to do with Brexit and actually a very good example of intergovernmental cooperation.
- WaynedP says:
  
  28 Apr28 April 16:13
  
  @LL +1, sadly.
  
  Only difference is I think Neville Chamberlain genuinely believed his own rhetoric, nobly but naively as it turns out.
  
  Still, at least both men learnt (are learning) that when you get into bed with a snake, it’s only a matter of time before you’re bitten.
Lady London says:

28 Apr28 April 12:54

Not “goes”. Gone.

TBH was generally more profitable to wait till a bit through the year, then look across countries to see where FX rates had moved since set, to give you a better price. Usually a far better bet than dutry free.
Lady London says:

28 Apr28 April 13:04

Uh? explain please.
The ancillary revenue in restaurant, hotel and other travel spend by wealthy segments of foreign tourists is where the the loss is. This far exceeds any VAT foregone and kept a lot of UK businesses going. Not really sure why the UK seems to have a “death wish” when retail is historically one of the UK’s greatest strengths relative to the rest of the world.
- Peter K says:
  
  28 Apr28 April 13:17
  
  Are you sure you are not pressing something by mistake LL when writing a reply? Or changing page? Etc. Maybe it would be worth analysing what you do so you can avoid it and the frustration of your replies ending in the wrong place?
  
  You seem to have a higher number of comments than most posting on the wrong place (though the gremlins do exist as it has occasionally happened to me).
  - mr_jetlag says:
    
    28 Apr28 April 13:37
    
    happens to many people, not just LL. Wordpress comment threading is just pants. I get orphaned replies probably 50% of the time as well. Bring on the forum.
  - Lady London says:
    
    28 Apr28 April 17:39
    
    probably because I should keep my replies shorter so as to risk less timing out/unwanted cache refresh? mid-reply that loses the link @ Peter K. You are probably right!
- Nick says:
  
  28 Apr28 April 13:45
  
  Very few people come to the UK just to go shopping, they come because it’s a ‘status’ destination and they can get selfies in front of Buck House (and similar). This won’t end just because we’ve stopped them avoiding tax on the retail purchases they make while they’re here. So hotels won’t lose out, airlines won’t lose out, and the taxpayer wins.
  - KBuffett says:
    
    28 Apr28 April 14:11
    
    I disagree. It’s a lose lose situation. Corporation Tax paid will also be lower as a result. Ultra high spender are highly sensitive about what the pay for their luxury goods and hence were coming to London to buy rather than buy in their expensive home countries (China, HK, UAE).
    They will now switch to other EU destinations and the government will lose all associated taxes.
  - bazza says:
    
    28 Apr28 April 16:50
    
    Honestly, don’t bother with these angry remainers obsessing every minute about bringing down Boris.
    - TGLoyalty says:
      
      28 Apr28 April 16:54
      
      Both these comment show neither of you understand why HNWI come to the U.K.