// High Court dismisses claim that gov’t failed to consider the “devastating impact” of scrapping tax-free shopping
// Lawyers argued that the move could cost around 50,000 jobs
// Justice Swift ruled these claims brought by Heathrow Airport and the two other businesses could not be argued
The High Court has dismissed a claim that the UK Government failed to consider the “devastating impact” of scrapping tax-free shopping for tourists on the travel and retail sectors.
In September, the Treasury announced the end of two schemes providing VAT-free shopping, which will be withdrawn at the end of the Brexit transition period on January 1.
Heathrow Airport, regarded as one of the busiest airports in the world, is applying for a judicial review of the decision.
- Selfridges, Chanel & Bicester Village warn £1bn could be lost on back of tax-free shopping cut
- 50,000 jobs at risk if Treasury scraps tax-free shopping
- UK retail “least attractive in Europe” if tax-free shopping is axed, retailers warn
World Duty Free Group, which operates duty-free shops in airports, and Global Blue, which operates tax-free shopping provision on the high street, are also part of the claim.
The Treasury and HMRC’s decision relates to two schemes – the VAT Retail Export Scheme (RES) and an Extra Statutory Concession (ESC) on goods at duty-free and tax-free shops.
The ESC allows VAT-free sales of goods to passengers travelling outside the EU at airports, and the RES covers VAT refunds on landside sales of goods also to non-EU travellers, subject to certain conditions being met.
In their written argument, lawyers for the three companies said ending the ESC could cost around 19,000 jobs, with between a further 27,000 and 41,000 jobs lost by stopping the RES.
In a hearing on Monday, they argued the decision to withdraw the schemes was irrational, without an evidential basis and also failed to take relevant factors into account.
Daniel Beard QC, representing the three companies, said the removal of the schemes would be a “hammer blow” to the industry.
He also argued the government had not factored in the “devastating impact upon businesses in travel and tourism that are already reeling due to Covid”.
Heathrow Airport’s claim is supported by witness statements from brands including Burberry and Chanel, as well as Edinburgh Airport and industry trade associations.
“There is no evidential basis for this call that is being made by the government, there is no evidence for it,” Beard said.
The barrister acknowledged that the economic benefits of the scheme may be regionally clustered.
“That is because you are dealing with a situation where you are looking, broadly speaking, where tourists are,” he said.
Paul Skinner, for the Treasury and HMRC, said a consultation had taken place between March and May 2020, involving all three organisations making the claim with written responses and meetings with stakeholders.
In written arguments, he said some evidence for the Treasury’s decision was outlined in the decision itself, adding the reasons were “unarguably adequate and rational” and that delays in the airport filing the claim meant the disclosure of documents had not been completed.
Skinner told the court that the rules of the schemes have been interpreted inconsistently.
“Some of the evidence that was put in the consultation responses was that not all the benefits were being passed on to consumers,” he said.
The barrister added that the balancing of the benefits of the schemes and the economic cost of withdrawing them were considered.
Skinner also said it would still be possible for a person to go to Harrods and purchase a handbag with a VAT refund, provided the item is directly shipped abroad and is not transported in a person’s luggage.
He added this will be extended to EU destinations from January 1, and inbound allowances for passengers arriving in Britain from the EU with goods for personal use would be introduced.
After arguments, Justice Swift ruled these claims brought by Heathrow Airport and the two other businesses could not be argued.
The judge noted there was a disagreement, “no doubt strong and severe with the Treasury’s decision”, adding he had no doubt about the claimants’ sincerity.
However, he said: “It is not possible to draw the inference that responses were ignored simply for the fact the conclusion reached was not the one supported by the majority of respondents.”
“It is not the role of the court to micromanage consultation procedures let alone to let claims to proceed that are attempts to rewrite consultation processes,” he added.
Two other grounds of appeal were previously granted permission to apply for judicial review which broadly “relate to errors of law”, including the relevance of World Trade Organisation rules.
The case is expected to return to the High Court on the remaining two grounds of appeal next week.
with PA Wires