Irish shoppers may win as UK plans return of VAT refunds for tourists

Irish visitors to Britain could save 20 per cent on their holiday shopping following a significant overhaul of the UK’s VAT regime announced by the British chancellor.

While the scheme, which will allow tourists and other travellers to Britain, to claim VAT back as long as the goods are exported from in their personal baggage, the savings are not likely to materialise until 2024 at the earliest.

If the proposals are implemented in the years ahead however, Irish consumers will be potentially be able to offset much of the cost of a short trip to Britain through VAT savings on high end electronics and other luxury goods.

The cost of a pair of Manolo Blahnik shoes, for example could fall from close to £1,200 (€1,346) to just under £1,000 once the VAT rebate is claimed, while a high end phone could cost as much as £400 less if the proposals are implemented.

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However, the VAT cuts will not apply to people crossing the Border from the Republic to the North because of the Northern Ireland Protocol.

Retailers and the hospitality industry in Britain welcomed the planned return of VAT-free shopping for international tourists, saying it would help to boost sales.

The UK government said it would consult on introducing a new tax-free shopping scheme for Britain and would modernise the one in place in the North.

The scheme will enable tourists to get a refund on VAT on goods bought on the high street, at airports and other departure points and exported from the UK in their personal baggage.

The move, which will cost almost £1.3 billion (€1.46 billion) in 2024-25, when it is likely to be brought in — according to government documents published alongside Kwasi Kwarteng’s mini-budget on Friday — unwinds the scrapping of the long-term VAT-free scheme in January 2021 by the former chancellor Rishi Sunak after Brexit.

The UK government said a consultation would “gather views on the approach and design of the scheme” before it was delivered as soon as possible.

Retailers, especially in tourist hot spots such as central London, have long called for the return of the scheme, saying its loss had led to tourists opting to spend more elsewhere.

Helen Dickinson, the chief executive of the British Retail Consortium, which represents most major retailers, said: “We welcome the reintroduction of tax-free shopping for tourists, which will boost sales and bring the UK back in line with other European nations.”

But she added that the government had not taken any measures to tackle the burden of business rates, the property-based tax which retailers say hobbles them from competing with online specialists such as Amazon.

“Retailers are facing immense cost pressures, not just from energy bills, but also a weak pound, rising commodity prices, high transport costs, a tight labour market and the cumulative burden of government-imposed costs,” Ms Dickinson said.

“Yet what was missing from today’s announcement was any mention of business rates, which are set to jump by 10% next April, inflicting another £800m in unaffordable tax rises on already squeezed retailers. It is inevitable that such additional taxes will ultimately be passed through to families in the form of higher prices.”

Kate Nicholls, the chief executive of UKHospitality, the trade body that represents restaurants, bars and hotels, added: “While tax-free shopping for overseas customers is a welcome step to attract overseas tourists, a far more immediately impactful step would be to reduce VAT 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 an equitable alternative to business rates.” - Guardian