Retailers and the hospitality industry have welcomed the planned return of duty-free shopping for international tourists, saying it will help boost sales.
The government said it would consult on introducing a new tax-free shopping scheme for the UK and would modernize the one in place in Northern Ireland.
The scheme will enable tourists to claim back VAT on goods bought on the high street, at airports and other points of departure and exported from the UK in their personal luggage.
The move, which will cost almost DKK 1.3 billion. pound in 2024-2025, when it is likely to be introduced – according to government documents published with Kwasi Kwarteng’s mini-budget Friday – will phase out the long-term VAT-free scheme in January 2021 by former chancellor Rishi Sunak after Brexit.
The government said a consultation would “gather views on the approach and design of the scheme” before it was delivered as soon as possible.
Retailers, particularly in tourist hot spots such as central London, have long called for a return to the scheme, saying the loss had led to tourists choosing to spend more elsewhere.
Helen Dickinson, chief executive of the British Retail Consortium, which represents most major retailers, said: “We welcome the reintroduction of duty-free shopping for tourists, which will boost sales and bring the UK back in line with other European nations. “
But she added that the government had taken no action to tackle the burden of business rates, the property-based tax that retailers say prevents them from competing with online specialists such as Amazon.
“Retailers are facing huge cost pressures, not only from energy bills but also a weak pound, rising commodity prices, high transport costs, a tight labor market and the cumulative burden of government imposed costs,” Dickinson said.
“However, what was missing from today’s announcement was any mention of business rates, which are set to jump by 10% next April, which will impose a further £800 million in unaffordable tax rises on already-squeezed retailers. It is inevitable that such extra taxes will ultimately be passed on to families in the form of higher prices.”
Kate Nicholls, chief executive of UKHospitality, the trade body representing restaurants, bars and hotels, added: “While tax-free shopping for overseas customers is a welcome step to attract overseas tourists, a far more immediately impactful step would be to reduce VAT for our home customers.
“Our VAT rate is the highest among modern economies, so if we want a globally competitive market, we need lower VAT and a fair alternative to business rates.”