Britain to bring back tax free shopping for international tourists

Britain will reintroduce sales tax free shopping for international tourists to boost the country’s retail sector, according to the Chancellor Kwasi Kwarteng.

Kwarteng revealed in his new Growth Plan that the government would consult on introducing a new tax-free shopping scheme for Great Britain and would modernise the one in place in Northern Ireland.

"Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres, to feel the economic benefit. So we have decided to introduce VAT-free shopping for overseas visitors," he told parliament during the presentation of a mini-budget.

The scheme, which will replace the old paper-based system with a digital one, will contribute to the government's ambitious target for 2.5% trend of growth, securing sustainable funding for public services and improving living standards for the public.

The previous tax-free shopping schemed was abolished at the end of 2020 by the former Chancellor Rishi Sunak after Brexit. The government added that a consultation would "gather views on the approach and design of the scheme" before it will be in place as soon as possible.

Paul Barnes, Chief Executive of the Association for International Retail said: "“The announcement is fantastic news for UK businesses and a great opportunity for growth across the UK. Britain will now be the only country in Europe where the 447 million EU citizens can come to do tax free shopping. This decision will create a whole new element to Britain’s already successful tourism industry.

It will be good for the London International Centres but also for regions throughout the UK. Local regions and local airports serving high numbers of EU visitors will benefit from both a rise in passenger numbers but also being able to sell tax-free goods to them, benefiting local economies from Manchester to Birmingham, and Liverpool to Edinburgh."

Joss Croft, Chief Executive Officer of UKinbound said: "We are incredibly pleased that the treasury has listened to the tourism and retail industries and will be introducing a VAT-free shopping scheme. This is a significant win for Britain PLC that will drive growth and export earnings into the UK."

Nigel Keal, UK Travel Retail Forum Chairman, commented: “This is a fantastic announcement by a government that has been clear from the start of its intention to put aside Treasury orthodoxy and find new ways to generate growth for the UK economy and industries.

“The travel retail industry welcomes today’s news. When the previous government removed tax-free shopping as a part of Brexit, the effects on a travel sector already struggling with the Covid pandemic were substantial. The restoration of tax-free shopping will be a boost to the recovery of our industry, and will put UK travel retailers on a level footing with their competitors around the world.”

Helen Dickinson, CEO of the British Retail Consortium, concluded: “We welcome the reintroduction of tax-free shopping for tourists, which will boost sales and bring the UK back in line with other European nations.”

However, she was among industry leaders disappointed that the Government did not cut VAT or address bumper business rates for high street firms. Kwarteng announced the abolishment of the top rate of income tax for the highest earners in his speech, as he spent tens of billions of pounds in a bid to drive up growth to ease the cost of living crisis.

John Webber, Head of Business Rates at Colliers, said: “It’s disappointing that while today’s “tax cutting“ Mini Budget addressed issues such as income tax, corporation tax, NI and stamp duty, the “elephant in the room”, business rates was largely ignored, despite the impact that ultra-high rates bills have had on businesses in recent years.”