Under the proposal, eligible non-EU visitors would again be able to claim a VAT refund on qualifying goods purchased in the UK and taken home. The scheme would initially apply to visitors from outside the EU while the Conservatives said it could later be extended to EU visitors if evidence showed that the measure generated sufficient economic returns.
The VAT Retail Export Scheme previously allowed overseas visitors to obtain VAT refunds on goods bought in Great Britain and taken out of the country in their luggage. The scheme was abolished for non-EU visitors by the previous Conservative government in 2021 and was not extended to EU visitors.
The proposal was announced by Conservative leader Kemi Badenoch, who was a Treasury minister when the VAT refund scheme was abolished. The Conservatives have said that restoring the scheme would help attract international visitor spending to UK retailers and other businesses connected to tourism.
According to figures cited by the Conservative Party, restoring tax-free shopping could bring up to 2.35 million additional visitors and £4.1 billion in additional spending. These figures are presented by the party as estimates of the potential economic impact of the proposal.
The party has also proposed measures to offset the cost of restoring VAT refunds, including changes related to charges for overseas visitors who are not eligible for free NHS treatment. The Conservatives said the measures would include more consistent recovery of unpaid NHS charges.
The proposed VAT refund scheme would not amount to a wider restoration of tax-free airport shopping. The Moodie Davitt Report reported on September 22 that the Conservatives had confirmed the proposal specifically concerns VAT refunds for eligible non-EU visitors and does not include the restoration of wider tax-free airport sales.
The proposal has drawn responses from UK political parties and government representatives. Labour described the announcement as a reversal of the Conservatives’ previous position on the scheme, while a Treasury spokesperson said visitors can still obtain VAT relief when goods purchased in the UK are shipped directly to their home country as exports.
The issue is also relevant to the UK’s international tourism and retail sectors. VisitBritain estimates cited by the Press Association and reported by ITV and The Independent indicated that international visitor numbers had returned to near pre-Covid levels by 2024, while real-terms visitor spending remained 8% below its pre-pandemic level.
The Conservatives said any extension of the proposed VAT refund scheme to EU visitors would depend on evidence of its economic returns, with the party stating that such an extension could be completed by the end of the next parliamentary term.
Tags: European Union United Kingdom
