The government has announced a number of changes to VAT and duty-free shopping which will take effect from 1 January 2021. This is expected to have a significant detrimental impact on UK retailers, tourism businesses and airport operators. The UK is expected to be the only country in Europe not to offer tax-free shopping to international visitors.
Currently non-EU visitors to the UK are able to claim a refund of the VAT on goods bought in the UK and taken home. From 1 January this is to be removed:
- Passengers travelling from the UK to non-EU countries will no longer be able to buy tax-free goods such as electronics and clothing at airports. This concession will be removed following concerns that the VAT is not always passed on to consumers at airports and that it puts high street stores at a disadvantage.
- The VAT Retail Export Scheme will end, and overseas visitors will no longer be able to obtain VAT refunds on items bought in British shops to take home as hand luggage. Overseas visitors will only be able to buy items VAT-free in store if they have them sent directly to their overseas addresses, meaning there will be associated shipping costs and the customer cannot immediately make use of their purchases. The scheme is to be removed because of concerns that it is costly and overly burdensome for HMRC to run – with that likely to increase if EU visitors could also make use of it at the end of the transition period.
There will be two main changes to the purchase of duty-free goods to bring EU and non-EU visitors inline:
- British passengers travelling to EU countries will be able to buy duty-free goods, including alcohol and tobacco products, in British ports, airports and international train stations, as well as aboard ships, trains and planes. This is likely to increase sales of alcohol and tobacco at airports.
- The allowance for duty-free alcohol, tobacco and other goods brought in by passengers from non-EU countries will be significantly increased and extended to EU countries.
Retailers have expressed their concern to the Treasury that the removal of the VAT reliefs could have a considerable impact on the tourism, retail, leisure and manufacturing industries and that it may further push shoppers towards online shopping.