Kwasi Kwarteng, finance minister of the UK presented the mini-budget on Friday and also announced the reintroduction of VAT-free shopping for overseas visitors.
The sales tax-free shopping has been brought back after being terminated in 2020 to encourage growth in the retail sector and help tolerate the rising inflation on the high street.
“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,” Kwarteng said as he announced the move in the parliament.
A refund on VAT will now be allowed for international shoppers with the reintroduction of this scheme. This will apply to products bought from the airports, high street, and other departure points and exported from the UK in their personal baggage.
The retail and hospitality sector has welcomed this decision of the government with open arms as they have found that the scrapping of the scheme back in 2020 drove a large number of buyers to other markets.
The scheme, which will cost almost £1.3bn, is yet to go through consultation before introducing it by 2024-25. There are also plans to modernize the system of the tax-free shopping scheme by making it entirely digital.
The UK government believes that a consultation would help “gather views on the approach and design of the scheme” before it can be brought back into practice.
What would this VAT-free shopping mean for British Retailers?
However, the chief executive of the British Retail Consortium, Helen Dickison, pointed out that the Retailers are under immense cost pressures and that Kwateng’s announcement was absent of business rates that are to increase by 10% by April 2024.
She said that although retailers are eagerly waiting for the return of the scheme, the government needs to take into consideration “£800m in unaffordable tax rises on already squeezed retailers.”
