Government U-turn on VAT-free shopping is ‘hammer blow’ for UK retail

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UK retail representative bodies have called the government’s decision to roll back promised VAT-free shopping a “hammer blow” for an industry still struggling to recover fully from the pandemic.

Jeremy Hunt

New chancellor Jeremy Hunt is reversing many measures in the September mini-budget

New chancellor Jeremy Hunt has rolled back many of the measures announced by his predecessor Kwasi Kwarteng at his mini-budget at the end of September, including cancelling the rise in corporation tax, the removal of the 45% top tax rate for high earners and the cut to the basic rate of income tax.

Another measure outlined by Kwarteng was tax-free shopping for non-UK visitors, which Hunt has also scrapped as the government flounders to calm jittery financial markets.

Hunt’s decision to scrap VAT-free shopping was heavily criticised by the British Retail Consortium and the Association of International Retail (AIR).

BRC director of business and regulation Tom Ironside said: “We are disappointed by the decision on tax-free shopping for tourists, which would have helped strengthen the UK’s position as a top destination for international shoppers.

“This decision leaves the UK as one of the only European countries not to provide a tax-free shopping scheme to encourage tourism.”

AIR chief executive Paul Barnes said: “The decision to reverse plans to reintroduce VAT-free shopping for international visitors will come as a hammer blow to UK tourism and the British high street.

“This short-sighted move is based on inaccurate and incomplete projections and risks putting a brake on the return of international visitors who are vital drivers of economic growth throughout the UK.

“We urge the chancellor to pause, reflect and commit to a full cost-benefit assessment before deciding on the future of tax-free shopping, which we know is a key motivator for international tourists when choosing where to visit.

“Ministers must base their decision on the full picture, including the significant economic benefit that international visitors bring to the UK, which this decision puts at risk.”