ZIMBABWE-BORN Ameerh Naran knows the secrets of the super-rich. He knows what they are spending and where in the world they are going to do so.
And that means he also knows where they are not spending it. Increasingly, the place where they are not spending it is the UK. Naran is the founder and chief executive officer of Vimana Private Jets, a company that acts as a broker for ultra-high net worth individuals seeking to charter luxurious private planes.
“Our average client is spending about a million dollars a month with us on their personal family travel,” he says. “We focus on the very, very top end of private jet travel. The amount they spend on shopping is far in excess of what they pay to travel there.”
Many of his clients are from the United States, the Middle East and Asia. “Our clients are flying increasingly to Paris and Geneva to shop. These are clients who used to regularly come to London to shop.”
The reason they are not flying to London is the decision by Rishi Sunak in 2021, when he was chancellor, to scrap tax-free shopping for foreign visitors.
The end of VAT-free shopping for tourists has been fiercely attacked by hundreds of business leaders who are in despair over the effect on luxury brands and their suppliers, and the knock-on effect on the hospitality industry, airports and West End theatres, as international shoppers go elsewhere.
“I knew immediately that it was going to negatively affect shopping because the world is so global in this day and age and it’s very easy to travel to another destination where you can get the tax back,” Naran says.
“It has a significant impact on the economy.” The good news is that Naran, whose family in Zimbabwe runs Conte Shoes (now Tika Shoes), has found a work-around to avoid paying the VAT. The bad news is that it is only good news if you’re a member of the private jetterati.
Naran is offering his customers a service that allows them to effectively courier their goods on a jet through a freight forwarding licence. They pay the full 20 percent VAT at the point of sale, but once the goods arrive at their destination beyond the European Economic Area, a company called SkyBlue Exports arranges for the tax to be reimbursed.
SkyBlue began offering the service through some private aviation companies, including Vimana and Harrods Aviation, last autumn. It takes a fee on a sliding scale as a percentage of the VAT, which is capped for higher value items. In the stratosphere Naran’s customers inhabit, do they really worry about the VAT? Absolutely they do, he says.
“One of my clients gets a budget of US$2 million a month from her husband to spend on clothes. So 20 percent of US$2 million is US$400 000. That’s what she would save by shopping in Paris versus shopping in London.
“It has more of an impact at the high end because you’re buying watches which are a quarter of a million to tens of millions of dollars. They’re buying artefacts and art where the values are very high; where 20 percent is a significant amount. I have a client who we fly to Ireland from the US to buy his watches because he gets his VAT back from there. The last time he ended up buying a watch for a few million dollars. This watch on a secondary market will depreciate a bit, but not 20 percent. So, he’ll still make a gain if he were to sell it four or five years from now, guaranteed, just because of the VAT.” His clients also travel to buy furnishings, sound systems and home movie systems.
“I was actually with a client yesterday who used to travel to London to buy Pétrus and similar wines, despite living in France. Now they just buy locally,” says Naran, whose company is based in Mauritius, but has offices in London and the US. Another option for avoiding VAT is for customers to have their purchases directly shipped and reclaim the VAT.
However, the appeal of the private jet option for high net worth individuals is that they can have their purchases immediately and don’t have to wait for them to arrive. SkyBlue decided the service would be most beneficial to customers living outside the EEA, saving the time it takes for goods to be shipped.
“The SBE service was set up to give customers the choice on how they export the goods they buy in the UK. Our service allows the customer to retain possession and control of their goods, whilst still benefiting from having the VAT they have paid reimbursed. Our service, although still in its infancy, has been very well received,” said Ben Amri, CEO of SkyBlue
Vimana works with Harrods and luxury brands including Asprey London, and the jewellers David M Robinson, Stephen Webster, Catherine Best and Ferrara Diamonds. Hedonism Wines, a fine wines and spirits boutique in Mayfair, London, draws a thirds of its customers from overseas and ships around the world, including on Vimana jets.
“VAT savings are important for all travellers, regardless of the total amount spent,” says Julien Le Doaré, its general manager. “The end of the tax-free shopping scheme has reduced the attractiveness of London and the UK in general and all key data show that cities like Paris, Milan and Madrid have benefited from it.
Offering options to refund the VAT is always received well by customers and can be a trigger to finalise a transaction. The end of the tax-free shopping had a significant impact on all businesses, he says. “Travelling on Eurostar from London to Paris these days you will notice that American and Asian tourists carry very few bags with them.
That is because they will do their shopping in Europe and recover the VAT once they have left. If the scheme were to be put back in place in the UK it would no doubt bring tourist spending back to the UK, including at Hedonism Wines. To this day we still have customers asking for the VAT form to obtain their refund at the airport.”
The Office of Budget Responsibility has estimated that axing Sunak’s decision to end the tax-free shopping scheme would cost the exchequer £2 billion. However, an analysis by the Centre for Economics and Business Research found that the loss of high-spending shoppers was costing the country £11 billion a year. Business leaders lobbied the last government hard and will be picking up the issue with the new government.
Last month, as it launched its annual report, the Crown Estate said that one of the reasons footfall in central London was down between 10 and 15 per cent on pre-Covid levels was the end of taxfree shopping. Brian Duffy, the chief executive of Watches of Switzerland, said this year that it was clear that Americans were choosing Paris and Barcelona over London for shopping trips, and the absence of VAT-free shopping had hindered the UK’s recovery from the pandemic. Christian Louboutin, the French luxury footwear designer, blamed the end of tax-free shopping for international visitors for its British business falling into loss this year. — The UK Times
