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| WHSmith could have pocketed £100m from airport VAT ruse in just five years | WHSmith could have pocketed £100m from airport VAT ruse in just five years |
| (34 minutes later) | |
| WHSmith may have banked around £100m over the last five years by failing to hand over VAT discounts to passengers passing through its airport stores, an analysis by The Independent suggests. | WHSmith may have banked around £100m over the last five years by failing to hand over VAT discounts to passengers passing through its airport stores, an analysis by The Independent suggests. |
| The revelation comes as the retailer’s reputation hit a near two-year low and pressure mounts on the newsagent and other shops with airport branches to offer cheaper prices to customers flying outside the EU. | The revelation comes as the retailer’s reputation hit a near two-year low and pressure mounts on the newsagent and other shops with airport branches to offer cheaper prices to customers flying outside the EU. |
| The company updated the City on its performance for the first time since The Independent sparked a passenger backlash by revealing that airport retailers pocket the VAT on goods they sell to customers travelling outside the EU – who should not have to pay the sales tax. | The company updated the City on its performance for the first time since The Independent sparked a passenger backlash by revealing that airport retailers pocket the VAT on goods they sell to customers travelling outside the EU – who should not have to pay the sales tax. |
| Executives declined to say how much the “boarding-pass revolt” had affected takings. But analysts believe around 15 per cent of WHSmith’s annual sales come from its airport stores and would be liable for VAT – meaning almost £50m of the sales tax will be collected by the company this year from its travel locations. | Executives declined to say how much the “boarding-pass revolt” had affected takings. But analysts believe around 15 per cent of WHSmith’s annual sales come from its airport stores and would be liable for VAT – meaning almost £50m of the sales tax will be collected by the company this year from its travel locations. |
| Experts estimate that around 40 per cent of all passengers flying from UK airports are travelling outside the EU, meaning WHSmith could be pocketing around an extra £20m this year alone by not having to pass the cash on to HMRC. Over five years, the total windfall could be around £100m. | Experts estimate that around 40 per cent of all passengers flying from UK airports are travelling outside the EU, meaning WHSmith could be pocketing around an extra £20m this year alone by not having to pass the cash on to HMRC. Over five years, the total windfall could be around £100m. |
| Retail analysts suggested the passenger revolt would probably cost WHSmith a fairly small sum – a couple of million pounds at most – but warned any future legalisation to close the VAT loophole could have an impact. | Retail analysts suggested the passenger revolt would probably cost WHSmith a fairly small sum – a couple of million pounds at most – but warned any future legalisation to close the VAT loophole could have an impact. |
| World Duty Free at Heathrow Terminal 2 | |
| Tony Shiret, of the investment bank BESI, said: “So far it appears to have seen minimal impact. That is not to say that this will not become more of an issue but we feel that it is likely to be a very low single-digit millions type of issue at worst. VAT is likely to linger as an irritant issue.” | Tony Shiret, of the investment bank BESI, said: “So far it appears to have seen minimal impact. That is not to say that this will not become more of an issue but we feel that it is likely to be a very low single-digit millions type of issue at worst. VAT is likely to linger as an irritant issue.” |
| Richard Chamberlain, retail analyst at RBC Capital Markets, added he felt WHSmith’s share price was unfairly hit after the scandal broke last week, when it sank nearly 4 per cent, but he warned the impact could be long-lasting. | Richard Chamberlain, retail analyst at RBC Capital Markets, added he felt WHSmith’s share price was unfairly hit after the scandal broke last week, when it sank nearly 4 per cent, but he warned the impact could be long-lasting. |
| He said: “Any financial impact on WHSmith is likely to be immaterial. Any legislation banning the practice of requesting boarding cards at airports would be unhelpful.” | He said: “Any financial impact on WHSmith is likely to be immaterial. Any legislation banning the practice of requesting boarding cards at airports would be unhelpful.” |
| While the City may be largely unconcerned by the fall, customers’ perceptions of the company have fallen to lows not seen since October 2013, according to YouGov. | While the City may be largely unconcerned by the fall, customers’ perceptions of the company have fallen to lows not seen since October 2013, according to YouGov. |
| BrandIndex, which measures the reputations of businesses, found that WHSmith had taken the brunt of negative sentiment during the scandal, despite other retailers including Boots and Dixons Travel facing criticism. | BrandIndex, which measures the reputations of businesses, found that WHSmith had taken the brunt of negative sentiment during the scandal, despite other retailers including Boots and Dixons Travel facing criticism. |
| Sarah Murphy, YouGov BrandIndex UK director, said: “Of the retailers caught up in the scandal that we monitor, it is WHSmith that has suffered the bigger hit to its perception among the public. Its Buzz score – measuring whether people have heard good or bad news about the brand in the previous two weeks – has decreased significantly. Boots, meanwhile, has seen a smaller decline. Fairly or unfairly, it seems the public has pinned this scandal on WHSmith. | Sarah Murphy, YouGov BrandIndex UK director, said: “Of the retailers caught up in the scandal that we monitor, it is WHSmith that has suffered the bigger hit to its perception among the public. Its Buzz score – measuring whether people have heard good or bad news about the brand in the previous two weeks – has decreased significantly. Boots, meanwhile, has seen a smaller decline. Fairly or unfairly, it seems the public has pinned this scandal on WHSmith. |