Update: 19 October 2022
Since taking up his new duties as Chancellor of the Exchequer on 14 October, Jeremy Hunt has reversed the previous mini-budget drafted by his predecessor. One of the schemes that was announced to be reintroduced was the VAT Retail Export Scheme. This scheme would have allowed overseas visitors to benefit from tax free shopping when leaving the country to return home.
However, the latest update of the mini-budget on October 17 has confirmed that this scheme will now not be reintroduced.
First published: 11 October 2022
In the UK Chancellor’s recent mini-budget, Kwasi Kwarteng announced that the UK is to reintroduce a new version of the VAT Retail Export Scheme that will allow tax free shopping for overseas visitors.
When the United Kingdom left the European Union due to Brexit, the VAT Retail Export Scheme, also known as VAT-free Shopping Scheme, was withdrawn on 1 January 2021. This scheme allowed non-EU travellers to recover VAT on their purchases from shops on the high street, ports and airports as they were leaving the country to return home.
The withdrawal of the scheme has had a negative impact on both the retail and travel industries. Some major retail brands have raised their voices to create awareness about the potential reintroduction of the scheme to attract more tourists and increase economic activity in Great Britain. The scheme is still in place in Northern Ireland.
What happens next with the VAT Retail Export Scheme?
No exact details as to when the VAT Retail Export Scheme will be reintroduced have been released yet.
Consultation and meetings will be organised to review the new arrangements and consider the risks and benefits of proposed changes. The UK Government is intending to modernise the scheme by making it digital with the aim of boosting luxury shopping and creating jobs to deal with a potential increase in tourists.
The new VAT-free shopping scheme for non-UK will enable people to obtain a VAT refund on goods bought on the high street, in airports and at other departure points. The key objectives are improving the customer experience and revenue protection.
Retailers will have an important role in the modernisation process as they will have a new responsibility to remain compliant at the point of sale.
As we learn more about the reintroduction of the Retail Export Scheme in Great Britain, we will publish another update.
Have questions about upcoming changes in the UK? Speak to one of our tax experts.