New Government scheme to end tax free shopping for UK visitors

The UK Government this week announced tax free shopping in the UK as we know it will end on 31st December this year.

All overseas visitors will no longer be able to obtain a VAT refund on items bought in the UK and take home in their luggage. Furthermore, UK airports will no longer be able to offer duty free items on fashion, accessories and beauty, with only alcohol and tobacco exempt from the new scheme.

The new regulations mean non-EU visitors who purchase items in store must have them delivered directly to their overseas addresses to be eligible for VAT-free shopping. This will be a costly deterrent for many shoppers when the cost of shipping goods internationally can be greater than items purchased.

The restrictions will make the UK the only country in Europe not to offer tax-free shopping to international visitors, greatly impacting London’s mecca of brands and stores as a global retail destination. The decision would affect the UK’s ability to remain competitive with Continental European countries and comes at a time when the luxury and retail sector is experiencing monumental challenges as domestic and international shoppers stay away and the country edges towards the changes brought by Brexit.

An unwelcome announcement

Walpole, the representative body of UK luxury companies, said this is an unexpected and unwelcome announcement at a time when Britain’s luxury brands are trying to remain resilient in the ongoing Covid-19 crisis. Walpole is extremely concerned by the decision’s inevitable impact, not only in London and other key UK shopping destinations for affluent international visitors, but also on the sector’s nationwide manufacturing hubs, where otherwise sustainable skilled employment will be affected by a further contraction in sales.

The Covid-19 crisis has already dramatically reduced numbers of international visitors to Britain, and other European cities, and the removal of tax-free shopping for anyone visiting the UK will leave Britain at a profound competitive disadvantage post-Brexit.

Walpole CEO, Helen Brocklebank, said in a statement: “International visitors are fundamental to the UK luxury sector’s recovery. Right now, the Government needs to be doing all it can to underline the allure of UK PLC and accelerating efforts to encourage affluent visitors to return to our shores rather than actively discouraging them with rulings like this. Globally famous brands like Burberry, Johnstons of Elgin, Harrods, Glenfiddich whisky and Hendrick’s Gin created a ‘jewel in the crown’ sector that was growing at nearly 10 percent each year before the pandemic, worth 48 billion pounds to the UK economy. 4.5 billion pounds in sales was generated by international visitors alone.

The luxury and retail sector has been badly hit

The sector has been badly hit by the pandemic and sales in the capital are reported to be down by nearly 95 percent in some areas. These sales help to secure 160,000 highly skilled, sustainable jobs up and down the country. The lack of tax-free shopping will put those jobs at further risk. Paris ranks as number one destination for luxury shoppers, closely followed by London. We will have no chance of retaining that position or becoming number one unless this decision is reversed.”

Walpole has joined forces with New West End Company along with the British Retail Consortium (BRC)¸the Association of International Retail (AIR), and colleagues in retail, tourism and airlines across the UK to express its deep concern and shock over the decision to the Chancellor.

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