Airports’ profits increasingly rely on passengers spending in shops (iStock)

    Is ‘duty free’ really duty-free?

    27 February 2017

    You may think that duty free no longer exists. One of the great holiday traditions taken away by the European Union. It is true that since 1999 you no longer can stock up on bottles of free booze and cartons of fags at the airport if you are travelling within the EU.

    However, World of Duty Free, the largest airport retailer in the UK, does offer alcohol free of duty and VAT if you are travelling outside the EU. The discounts look large, and the range of gin, whisky and rum is extensive. Flying on business to Asia — well, why not buy a bottle of premium London Gin at a discount price? But just how duty-free is it really?

    This was something that I wanted to find out when I went shopping undercover at Heathrow, Stansted and other airports, as part of a Channel 4 Dispatches programme, Inside Britain’s Airports, to discover how airports’ profits increasingly rely on passengers spending in shops — rather than on aviation fees. Figures released just last week by Heathrow show that retail revenues are growing considerably faster (up seven per cent) than aviation revenues, which are stagnant.

    And, to be honest, I am still slightly in the dark about whether non-EU travellers really are getting their alcohol fully duty-free. That’s because World Duty Free operates a fiendishly complicated pricing system. It offers a number of bottles of alcohol marked on the shelf with a little green label next to the price stating: ‘Only for passengers travelling outside the EU’. It means that anyone can buy the bottle, but the stated price is only available to those travelling outside the EU.

    Let me give you an example. At Heathrow, travelling to Manchester, I bought a one litre bottle of Jameson Irish Whiskey that was labelled on the shelf as £18.59 ‘only for passengers travelling outside the EU’. But if you take the bottle to the till, as I did, and hand over your boarding pass, as they insist you do — and they then discover that you are flying within the EU — the price goes up to £28.49.

    Now, let’s put to one side consumer experts who say prices in shops should be made abundantly clear to consumers on the shelf and not be revealed when you get to the till — especially when there might be two prices for the same item. And let’s concentrate on this £28.49.

    If you take off the VAT (20%) and the duty (a set price determined by the alcohol in the bottle — in this case, £11.06), you end up with a price of £12.68. So why is World Duty Free charging passengers a duty free and tax free price of £18.59, not £12.68?

    Well, the company say that their calculations for tax and duty-free are not based on the full price an EU traveller pays at the till (£28.49), but on an original price of £35.58. Now, compared with this figure of £35.58, travellers flying outside the EU are getting a big bargain at £18.59. But where World Duty Free gets this £35.58 price from is a slight mystery, as the company itself — on the shelf — says the average high street price is £31.01.

    Most duty free shops buy their alcohol from wholesalers who store their alcohol in bonded warehouses. It usually arrives at airports never having incurred VAT and duty. It’s only at the till, when it is discovered you are flying within the EU, that VAT and duty is usually charged and then handed over to HM Revenue and Customs.

    Now, it should be made clear that World Duty Free denies its pricing is confusing. It says that only a tiny fraction of customers ever complain about this dual-pricing system and that it offers significant discounts to people flying both within and outside the EU. This is true — even the price I paid for a litre of Jameson Whiskey, £28.49, when I was flying to Manchester, was slightly cheaper than the £28.70 I could buy it at Tesco. But, if I am flying to America or Asia, am I really getting the full duty and VAT knocked off my purchases? I’m still confused.

    Dispatches: Inside Britain’s Airports is avaiable to watch on the Channel 4 website