By Michiel Willems, cityam.com
Heathrow Airport has lost a High Court bid to challenge the scrapping of tax-free shopping for tourists.
Two schemes providing VAT-free shopping for some international visitors were withdrawn by the Treasury at the end of the Brexit transition period on 1 January of this year.
The Treasury and HMRC’s decision related to the VAT Retail Export Scheme (RES) and an Extra Statutory Concession (ESC) on goods at duty-free and tax-free shops.
The ESC allowed VAT-free sales of goods to passengers travelling outside the EU at airports, and the RES covered VAT refunds on non-airport sales of goods also to non-EU travellers, subject to certain conditions being met.
Heathrow Airport, along with World Duty Free Group, which operates duty-free shops in airports, and Global Blue Ltd, which operates tax-free shopping provision on the high street, brought legal action to challenge the decision.
In November, the High Court dismissed a claim that the Government had failed to consider the impact of the decision on the travel sector, then described by Heathrow’s barrister as a “hammer blow”.
At a hearing in February, the businesses attempted to appeal against the decision, as well as try to bring other grounds for a judicial review.
However in a judgment on today Lord Justice Green dismissed the case.
The judge, sitting with Mrs Justice Whipple, heard a consultation had taken place in March 2020 about the decision, accepting evidence from the companies.
He ruled: “The Chancellor properly informed himself as to the information needed to take the relevant decisions and conducted a proper balancing exercise of pros and cons.”
Lord Justice Green continued: “Standing back, my conclusion is that the decision-making process leading up to abolition was characterised by the Government seeking and obtaining relevant evidence and conducting a proper balancing exercise.
“This process and the resultant decisions were squarely within the Government’s margin of judgment and discretion.”
The judge also found the Government was right to conclude that both schemes would have breached international trade rules after the transition period.
Lord Justice Green said: “In short, maintaining the VAT RES was, as the Government set out in its written submissions, ‘clearly discriminatory, with exports to the EU not benefiting from an advantage granted to exports outside the EU’.”
“The court expresses no view on the merits of the decision to abolish tax-free sales, which was essentially a political one for the Government to take.
“The challenges concern issues of law and procedure only,” the judge also said.
After the ruling, managing director of Global Blue UK Derrick Hardman said: “We are disappointed with the court’s ruling and we highlighted many errors in the decision-making process which undermine the rationale for this policy decision.
“This ruling does not mean that the Government’s new tax is right. It just confirms that the process used to reach this decision fell within the guidelines for policy making.”
He added: “We at Global Blue strongly disapprove of this decision as we know it will deeply damage the attractiveness of UK tourism and shopping.”