Retailers push for VAT-free shopping return to be fast-tracked

By

Sandra Halliday

Published
Sep 26, 2022

The UK retail euphoria around news in Friday’s mini-budget that VAT-free shopping for tourists is being reintroduced and extended to EU visitors has been tempered somewhat by suggestions it won’t happen until 2024. But retailers are pushing for an earlier return.

The Telegraph reported that a coalition of big names in retail — including outlet mall Bicester Village, globally-focused Heathrow Airport and many West End businesses — aims to persuade ministers to fast-track the plans so they’re in place in time for the King’s coronation in 2023.

The UK all-but-abolished VAT-free shopping for all tourists at the start of 2021, despite sector hopes that Britain’s EU exit would mean an extension of the scheme rather than its removal.

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The old system was responsible for attracting many non-EU visitors to shop in Britain, although it had its drawbacks as it was a cumbersome, paper-based one. The government is aiming to reintroduce it as an all-digital system, but the Treasury thinks that this could mean a delay of around two years in implementing it.

But retailers think it can be done quicker than this and with a large number of tourists expected to visit Britain for the coronation that's likely to happen next summer, it would seem logical to aim to get it in place by then.

FashionNetwork.com has frequently heard from specialists in the area — such as Vat-free shopping facilitator Planet — that ready-made digital systems that could be applied relatively quickly and they have proof of this as they’ve done it in other key duty-free shopping markets around the world.

Meanwhile, Paul Barnes, head of the Association of International Retail, told the newspaper that the policy reversal will make the UK “one of the best places to go shopping in the world”.

He added that the decision to reintroduce the benefit will attract non-EU visitors who might otherwise have made Paris or Milan their main shopping focus, as well as EU shoppers who aren't able to get their VAT refunded when they shop in other EU countries.

He said “we're now back on a level playing field” for global shoppers and the ability to attract EU shoppers “is a massive pull for the tourism industry… It's made us the most attractive place in Europe for Europeans to go shopping”.

Barnes said retail chiefs will make the case that a digital system can be brought in at no cost to the government within six months.

VAT-free shopping for tourists was originally abolished in order to claw back cash after the British government had spent billions supporting the country through Covid. 

The current government expects that reintroducing the benefit will cost £2 billion by 2026-27. But the retail and hospitality sectors believe that this figure will be dwarfed by the wider benefit as large numbers of tourists come to the UK, spend heavily and boost the profits of stores, theatres, restaurants and hotels. Another benefit would most likely be the creation of jobs in all of those sectors.