Ministers tell retailers they must pass on VAT savings at airport stores

• Chief Secretary to Treasury says tax relief was put in place to help customers
• Select committee member Steve Baker warns of potential investigation
• Boots, Dixons and WHSmith have been accused of not passing on savings

Retailers that make passengers show their boarding passes at the checkout are able to receive VAT discounts if they are taking flights outside the EU, but an investigation by the Independent has found these savings are not being passed on to customers.

Chief Secretary to the Treasury David Gauke has insisted the VAT relief was put in place to reduce prices for consumers rather than as a windfall for retailers.

He told The Daily Telegraph: “While many retailers do pass this saving on to customers it is disappointing that some are choosing not to. We urge all airside retailers to use this relief for the benefit of their customers.”

Treasury select committee member Steve Baker believes passengers are being ripped off and has warned his select committee may investigate.

Airport prices

The investigation alleges retailers including Boots, Dixons and WHSmith are failing to pass on the savings to customers.

Boots charges the same for all products it sells in its airport stores as it does on the high street.

Meanwhile, Dixons Travel charges £619 for an iPhone 6 on the high street and while in airport stores it is cheaper at £593.99, the retailer would save £123.80 in VAT on the product for non-EU passengers.

WHSmith said that while VAT is not charged on books and magazines in airports, it does not pay tax on other products when passengers show their boarding passes.

In contrast, Harrods sells all products duty free in its Heathrow stores.

Retailers request shoppers show their boarding passes while at the checkout to save on VAT, even though it is not obligatory for customers to do so.