Frequently Asked Questions
Travel retail may be broadly defined as the purchase of goods and/or services by travellers undertaking a journey. In its widest sense, therefore, travel retail would also include sales at motorway service areas and purchases of refreshments on board trains. However, the UK Travel Retail Forum is primarily concerned with sales made to travellers undertaking international journeys as these are subject to a whole range of rules and regulations which do not apply to domestic travel retail sales. Our principal interest is, therefore, those retail sales made at airports and on board aircraft and ships; also, in this context, the term travel retail is used generically to include both duty and tax-free, and duty and tax-paid sales.
Income to airports from non-aeronautical revenue is hugely important, accounting for 41% in Europe. Of that, the lion’s share – 47% – comes from airport retail. With 43% of Europe’s airports loss-making, and with regional airports among the most vulnerable, the contribution of airport retail is indisputable.
Unlike levies such as those for air passenger duty or fuel surcharges made on passengers at the time of booking their tickets, airport shopping is a completely discretionary activity. In a recent study, 47% of passengers list shopping as one of their favourite airport activities and 60% of European passengers regularly make purchases at airports, making an increasingly valuable contribution to financing airport investment and thus supporting better airports, a greater choice of routes and more connectivity for passengers. Airlines have also benefitted from much lower airport charges and better facilities as a result of passenger retail purchases.
More information on the contribution made by airport retail can be found on the “Links and Resources “ pages. Read more
It all depends on the destination to which you are travelling. Prior to 1999, sales of goods to all international travellers were generally duty-free, but on 1 July 1999, duty and tax-free sales within the European Union were abolished. From that date onwards, duty and tax at the rate applied by the Member State of departure is paid on purchases made by travellers undertaking a journey within the EU. EU Member States.
Yes – even though the terms “duty-free” and “tax-free” are often used synonymously, there is a difference between them. “Duty-free” means that goods are free of excise duty (which applies only to tobacco, alcohol and mineral oils) whereas “tax-free” means that goods are free of VAT. However there is an additional factor in that VAT is also applicable to tobacco and alcohol, and therefore in practice ‘duty-free’ means that products are free of both excise duties and VAT, whereas ‘tax-free’ applies to all other goods which are only liable for VAT, such as beauty products, watches, cameras, fashion goods, etc.
A standard duty-free allowance was first introduced in 1954 by the “Convention Concerning Customs Facilities for Touring”, held in New York and signed by 84 countries.
The prime purpose of the Convention was to facilitate the flow of travellers across national boundaries and one principal measure agreed was that of an import allowance for travellers, to enable them to enter a signatory country with a limited quantity of goods free of local taxes and without being subject to normal Customs procedures. Allowances for travellers entering the EU were revised on 1 December 2008, the principal changes being the abolition of the previous quantity allowances for perfume and eau de toilette, and a significant increase in the value allowance for all other goods to compensate for the loss of the separate allowances for perfume and eau de toilette. The allowances are as follows:
- 200 cigarettes OR 100 cigarillos OR 50 cigars OR 250 grams of tobacco
- 1 litre of spirits or strong liqueurs over 22% ABV OR 2 litres of fortified wine (such as port or sherry), sparkling wine, or other liqueurs under 22% ABV
- 4 litres of still table wine
- 16 litres of beer
- £390 worth of all other goods including perfume, cosmetics, gifts and souvenirs.
Allowances are subject to the following conditions:
- (i) Travellers under the age of 17 cannot have the tobacco and alcohol allowances.
- (ii) Travellers are only entitled to the allowances if they travel with the goods and do not sell them.
- (iii) Travellers with other goods worth more than the limit of £390 must pay charges on the full value and not just the value above £390.
- (iv) The value allowance cannot be pooled by those travelling together.
- (v) Any remaining duty-free and tax-free goods purchased on leaving the UK count as part of the allowance.
Some countries do permit travellers to bring in additional quantities of some goods, whereas others have restrictions on certain products, such as tobacco. EU Member States now have the option of applying a lower limit of just 40 cigarettes instead of the standard allowance of 200, but this is primarily intended for those crossing land frontiers rather than for air travellers. Travellers are strongly recommended to check the precise allowances for the country they intend to visit. Further information on UK allowances can be found on the HMRC website. Read more.
The simple answer is that they pay the VAT due themselves, rather than pass this on to the traveller. VAT is due on all sales made to passengers travelling to a destination within the EU – there are no exceptions to this. However, some retailers wish to ensure a consistent offer to all travellers, whether EU or non-EU, and in order to do this they account for, and pay to HMRC, the VAT due on that element of their sales made to EU passengers. This typically only applies to tax paid goods – for goods liable to excise duty such as alcohol and tobacco, the excise duty is usually sufficiently great to make such an offer impractical for retailers.
In practice, yes. Although EU law permits individuals to purchase unlimited quantities of goods that are duty and tax paid in another Member State, and to carry them back to their home country without any further liability for duty or tax, they must both be transported personally and be for their own personal consumption only. In order to combat abuse of this privilege by smugglers taking advantage of the significant differences in tax and duty rates across the EU, Member States are permitted to apply “indicative levels” for goods which are subject to excise duty, such as alcohol and tobacco. Travellers with excise goods in excess of these levels may be challenged, and possibly prosecuted, if checks reveal that the goods are for a commercial use rather than personal consumption. The standard indicative levels across the EU are as follows:
- Alcohol: 10 litres of spirits, 20 litres of fortified wine, 90 litres of wine (including a maximum of 60 litres of sparkling wine) and 110 litres of beer
- Tobacco: 800 cigarettes, 400 cigarillos, 200 cigars and 1 kg tobacco.
However, it is stressed that these indicative levels are not limits, merely guidelines. Travellers are more likely to be challenged if they have goods in excess of the indicative levels, but they can still be challenged even if they have less, if it is suspected that the goods are for a commercial purpose. The prime consideration for HMRC is whether or not the goods are for personal consumption – this is defined quite broadly and includes gifts and goods purchased for particular circumstances, such as cases of champagne for a son or daughter’s wedding reception. On the other hand, any re-sale of the goods – including sales at cost to friends or neighbours – would classify them as being for a commercial purpose and therefore liable to UK duty. Further information can be obtained from HMRC’s website. Read more.
Duty-free on arrival is at the discretion of national fiscal authorities. The traditional basis of duty-free is that it enabled travellers to carry limited quantities of excise goods free of duty and tax on their journey; historically this was to sustain them during long and often arduous journeys by sea, but today most duty-free goods are imported intact into the country of destination. National fiscal authorities have therefore always regarded duty-free sales as exports and, for this reason, the majority of countries do not permit duty-free sales on arrival, as these would represent a far more direct and immediate threat to national tax revenues. However, the decision is entirely one for national fiscal authorities and a number of countries, principally in the Middle and Far East, do allow duty-free on arrival. Two European countries, Norway and Switzerland, have introduced duty-free shopping on arrival. It is possible that other countries may follow suit, but at present most European fiscal authorities remain firmly opposed to the principle of duty-free on arrival. There are currently arrivals shops at a number of UK airports – principally Heathrow, Gatwick and Manchester – but these are only allowed to sell goods on a duty and tax paid basis.