Retail welcomes return of tax-free shopping despite bitter rates disappointment

In today’s ‘mini-budget’, new chancellor Kwasi Kwarteng scythed through a raft of scheduled tax increases in a bid to break the “cycle of stagnation” that had gripped the UK. Among the initiatives unveiled was the reintroduction of VAT-free shopping. 

In the mini-budget documents, the Treasury said the new scheme would be a “modernised” form of the model that already exists in Northern Ireland and would “introduce a new digital scheme in Great Britain” following a consultation period. 

“The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.”

Retail experts said the move would be huge for luxury retail brands and destinations such as Bicester Village and the West End where high-net-worth tourists have tended to shop in the past. 

New West End Company interim chief executive Dee Corsi said: Today’s decision to reintroduce tax-free shopping for overseas visitors is a great victory for London’s international centres.

“Now the West End can compete on a level playing field with Paris, Milan and Madrid as one of the world’s top shopping and leisure destinations.

“In 2019, international visitors contributed over £28bn to the UK economy. The government’s announcement is great news and – with new exciting new brands expected across the West End following today’s announcement that newly opened businesses will not be subject to business rates – we are confident that we can exceed this figure in the years to come.”

The chancellor also cut the scheduled National Insurance rise and increase in stamp duty.

Combined with the pre-announced measures to cap energy prices for people and businesses, British Retail Consortium chief executive Helen Dickinson said the new government had done something to shore up consumer demand with the VAT-free announcement and help on bills.

However, she said retailers would be disappointed by a lack of meaningful action on business rates. 

“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. 

“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. There is still time for the government to act. Freezing the business rates multiplier will stimulate investment and will allow retailers to focus on what’s important – keeping prices down for households.”

The lack of government action on business rates also irked retail business owner Theo Paphitis, who took to Twitter to say: “Very disappointed business rates were yet again not addressed by the chancellor, and had he done so, would have undoubtedly made a much more positive impact on the economy and jobs than many of his other reforms!”

Commercial real estate advisory firm Altus Group said the government’s failure to act again on business rates would cost retailer, leisure and hospitality businesses £5bn at the next rate rise in April.