UK retailers issue stark warning over delays in tax-free shopping reform

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A group of more than 300 retailers, led by the British Retail Consortium and New West End Company, have called for the government to modernise its tax-free shopping system.

The group, which consists of hundreds of retailers based in London’s West End, as well as Harrods and Bicester Village shopping centre, represents almost the entire UK tax-free shopping industry.

In a letter address to Chancellor Philip Hammond this morning, the group implored him to modernise the tax-free shopping system or face further loss from international competition post-Brexit.

The letter, which was also signed by other VAT refund operators, also describes the loss of confidence UK retailers have felt over the digitisation of tax free shopping.

It asks “as a matter of urgency that the government takes action to introduce a digital system at the earliest possible moment”.

“We have lost confidence in HMRC’s ability to deliver its preferred  option,  which  we  believe  is  unnecessarily  ambitious,  will create  an  inferior  product,  will  introduce  additional  risks  and  uncertainty,  and  will  see  the  UK diverging  from the global norms for tax free shopping schemes,” it reads.

Although the government has plans in place to introduce a digital system, which has been in development since 2013, and the HMRC last month set the delivery date back to 2020.

Detailing the government’s slow progression to move away from a dated paper system, the letter describes how a failure to act is damaging London and the UK’s reputation as a global retail destination.

It recommends adopting a faster, cheaper and less risky system which would build on, rather than replace, the existing digital infrastructure, operated by retailers and their VAT Refunding Organisations (VRO).

“London’s two international shopping centres of the West End and Knightsbridge account for over 80 per cent of tax free shopping in the UK”, New West End Company chief executive Jace Tyrrell said.

“Our retailers are frustrated at the time being taken to digitalise the system but are also worried about the negative impact of HMRC’s preferred model.

“It’s time for a total rethink to stop the UK falling further behind our international competitors.”

The body of retailers and trade groups added that tax-free shopping contributes around £2.5 billion worth of retail sales every year from international visitors, adding millions of pounds to the UK economy.

“Retailers are concerned that HMRC’s ambitious preferred option will introduce further delays to the digitalisation process, increasing costs and further damaging the experience of international visitors to the UK”, British Retail Consortium chief executive Helen Dickinson said.

“Retailers would like to see a much simpler, cost effective model implemented which can better cope with the expected increases in international shoppers and provide a faster, more convenient reclaim experience.”

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