The Conservatives have pledged to bring back tax-free shopping for overseas visitors as part of plans to boost spending across Britain’s high streets.
Party leader Kemi Badenoch said a future Conservative government would restore VAT refunds for eligible visitors from outside the EU, reversing the decision made by the previous Tory government to scrap the scheme in 2021.
The party said the measure could generate £4.1bn in additional spending and attract as many as 2.35m extra visitors to the UK each year, citing analysis from the Centre for Economics and Business Research.
Under the plans, the scheme would initially apply to non-EU tourists, before potentially being extended to EU visitors if evidence showed it paid for itself. The Conservatives said a wider rollout could be completed by the end of the next Parliament.
Badenoch said: “Britain should be the place where the whole world comes to shop,” adding that UK retailers were being put at a disadvantage as international shoppers opted to spend in rival European destinations.
The return of tax-free shopping has long been pushed for by retail bosses, particularly across the luxury sector, who argue its removal has diverted tourist spending to cities such as Paris and Milan.
Fortnum & Mason chief executive Tom Athron, Watches of Switzerland boss Brian Duffy and executives at Charles Tyrwhitt are among those backing the Conservatives’ proposal.
British Retail Consortium chief executive Helen Dickinson has also said the absence of the tax break puts the UK at a “clear disadvantage” to rival shopping destinations.
Visitor numbers have recovered to close to pre-pandemic levels, but real-terms international visitor spending remains around eight per cent lower, according to estimates cited by the Conservatives.
The VAT Retail Export Scheme previously allowed eligible international visitors to reclaim VAT on goods bought in Great Britain and taken home in their luggage.
Current rules only allow shoppers in Great Britain to buy goods tax-free where retailers send the purchases directly to an address outside the UK.
The Conservatives said the policy would cost around £540m a year and would be partly funded through measures aimed at recovering unpaid NHS charges from overseas visitors who are not entitled to free treatment.
Labour described the proposal as a reversal of the Conservatives’ previous position and questioned how the policy would be funded. The Treasury said international visitors can already receive VAT relief when goods purchased in Britain are shipped directly overseas.
Click here to sign up to Retail Gazette‘s free daily email newsletter
