Business Minister Nigel Huddleston is urging companies impacted by the UK government’s decision to scrap VAT-free shopping for overseas tourists to provide him with evidence. In December 2020, during the pandemic, The Treasury removed VAT-free shopping for non-UK visitors. This was later restored during Kwasi Kwarteng’s disastrous September 2022 mini-budget. Oxford Economics estimates that reintroducing VAT-free shopping could provide a £21bn boost to the economy over five years and support 78,000 jobs as experts claim it would inject £4.1bn per year into the country’s economy.
While some argue this move costs the government £2bn a year in lost revenue and benefits only the wealthy visitors to central London, others claim there would still be a net annual gain of around £350m from the trickle-down benefits of tourists spending money across the UK. Being able to scrap VAT for all overseas customers, including those from the EU, China, the Middle East, and the US, was viewed as a Brexit advantage by many retailers, providing UK companies with a competitive edge over their rivals. However, experts warn that London is now losing tourism to cities like Paris and Milan.
Selfridges, Burberry, and The Ritz, together with luxury goods trade body Walpole, are among the firms lobbying to restore tax-free shopping. Mr. Huddleston revealed that Chancellor Jeremy Hunt will consider reintroducing VAT tax-free shopping in his autumn statement, balancing the need to raise funds for public services while encouraging tourism. Therefore, the appeal is for affected businesses to send evidence to Nigel Huddleston MP if their firm has been hit by the removal of VAT-free shopping.
Further reading:
– What is the VAT Threshold? – At what point do small businesses have to start paying VAT? Should firms voluntarily pay VAT? And what are the legitimate ways to stay under the VAT threshold?
– Sole traders increasingly avoid charging VAT – Tens of thousands of small firms deliberately stay small to dodge VAT, meaning that prices must increase if they cross the £85,000 threshold.
– Hunt scraps VAT-free shopping and presses on with IR35 reforms – Chancellor Jeremy Hunt has reversed nearly all of Kwasi Kwarteng’s tax cuts, loading billions onto small business owners’ bills.
