Tax-free shopping for overseas visitors scrapped

Recent plans to reintroduce tax-free shopping for international visitors in the UK have been scrapped.

Last month, former Chancellor, Kwasi Kwarteng reintroduced tax-free shopping as part of his mini-Budget.

However, the new Chancellor, Jeremy Hunt, repealed this measure in his fiscal statement yesterday, confirming that the Government will no longer be progressing with the scheme.

Hunt stated that “not proceeding with this scheme is worth around £2 billion a year”.

What would the scheme have done?

The tax-free scheme would have allowed overseas visitors to claim a refund on the VAT paid on items purchased in stores, at airports and other departure spots, before taking them out of the country to return home.

The policy was first cancelled in January 2021 as part of the Government’s Brexit plan but was due to be introduced once again prior to yesterday’s announcement.

What does it mean for the retail sector?

Many retailers are unhappy with the decision, having rallied for the return of the scheme for quite some time, insisting that tourists were spending their money in rival cities as a result.

Helen Brocklebank, CEO of the British Retail Consortium, said that the scheme would have successfully delivered growth to quicken post-pandemic recovery, as well as considerably improved UK manufacturing.

She continued: “Having become the only country in Europe without tax-free shopping was a significant impediment to post-pandemic recovery, risking our competitiveness, and risking stultifying a $34 billion industry.”

Wondering how these recent changes will affect your business? Contact us for advice.

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Posted in Blog, Latest News, Tax.