The government said it would consult on introducing a new duty-free shopping system for Great Britain and modernize the one in place in Northern Ireland. The scheme will allow tourists to get a VAT refund on goods bought on the high street, at airports and other points of departure and taken out of the UK in their personal luggage. The move, which will cost almost £1.3 billion in 2024-25 when it is likely to be implemented – according to government documents released alongside Kwasi Kwarteng’s mini-budget on Friday – unveils the scrapping of the long-standing VAT-free system in January 2021 by former chancellor Rishi Sunak after Brexit. The government said a consultation would “gather views on the approach and design of the system” before it is delivered as soon as possible. Retailers, especially in tourist hot spots such as central London, have long called for the scheme to be brought back, saying its loss had led tourists to choose to spend more elsewhere. Helen Dickinson, chief executive of the British Retail Consortium, which represents most major retailers, said: “We welcome the return of duty-free shopping for tourists, which will boost sales and bring the UK back into line with other European nations”. “Retailers are facing huge cost pressures, not just from energy bills, but also from a weak pound, rising commodity prices, high transport costs, a tight labor market and the cumulative burden of government-imposed spending,” Dickinson said. “But what was missing from today’s announcement was any mention of business rates, which are due to rise by 10% next April, causing another £800m in unaffordable tax rises on already squeezed retailers. It is inevitable that such additional taxes will eventually be passed on to families in the form of higher prices.” Kate Nicholls, chief executive of UKHospitality, the trade body representing restaurants, bars and hotels, added: “While duty-free shopping for overseas customers is a welcome step in attracting overseas tourists, a far more immediately effective step would be to VAT reduction for our domestic customers. “Our VAT rate is the highest among modern economies, so if we want a globally competitive market, we need lower VAT and a fair alternative to business rates.”
