New VAT-free shopping scheme for overseas visitors – NOW DROPPED

5 October 2022| CATEGORIES: hospitality and tourism, VAT, VAT refund, VAT-free shopping| TAGS: Growth Plan 2022, shopping, tax-free, UK, VAT-free

UK Chancellor, Kwasi Kwarteng, delivered the Government’s Growth Plan for the UK on 23 September 2022. A surprise announcement on VAT was the decision to reintroduce a tax-free shopping scheme for international visitors to the UK.

What has been announced?

It was announced that the government will introduce a modern, digital, VAT-free shopping scheme with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. The delivery will include modernising the scheme that currently operates in Northern Ireland and introducing a new digital scheme in Great Britain.

A consultation will gather views on the approach and design of the scheme, to be introduced as soon as possible. The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.

Victory for UK businesses

This is good news for retailers and puts Great Britain back on a competitive footing with EU countries. According to Visit Britain, it was estimated that approximately £3.5bn in tax-free sales were made to non-EU tourists in 2018 before the incentive was withdrawn from 1 January 2021 following Brexit (see our Brexit Alert for further information).  A major drawback of the old scheme was that it was unwieldy and largely manually based.

Walpole Chief Executive Officer, Helen Brocklebank, said:

“The luxury tourism sector makes a significant £30bn contribution to the UK economy, and supports a wide ecosystem of manufacturers, retailers, cultural institutions, hotels and restaurants based in all corners of the United Kingdom. This is a hugely welcome measure which will ensure the future of many small businesses and create jobs across the whole of the UK.”

We will monitor developments on the consultation process and planned introductory date.