Treasury says tax-free tourist shopping 'does not directly benefit Brits'

The Treasury has played down speculation it could re-introduce tax-free shopping for overseas visitors after hospitality industry figures called for a return of the scheme.

Ministers are under pressure to allow tourists from non-EU countries to claim a VAT refund on purchases made during their trip after hoteliers warned travellers are “bypassing” the UK since the policy was scrapped.

Sir Rocco Forte, chairman of Rocco Forte Hotels, has sent an open letter signed by over 120 business leaders to chancellor Jeremy Hunt calling for a return of the scheme.

Trade minister Nigel Huddleston this week called for businesses to share more “data and information” over the impact of the policy with the Treasury to help inform future decisions.

However, a Treasury spokesperson told The Caterer: “VAT-free shopping does not directly benefit Brits – it allows foreign tourists who buy items in the UK to claim back VAT as they return home.

“We continue to back high street retailers by slashing business rates bills by 75%, helping with energy bills and effectively cutting corporation tax by £27b through full-expensing.”

VAT refunds for overseas visitors in British shops ended in January 2021 following a post-Brexit review of tax policy.

Kwasi Kwarteng announced plans to reintroduce tax-free shopping during his short-lived tenure as chancellor last year, but the Treasury later scrapped the move and said it would cost the UK £2b a year.

However, Forte told The Caterer the calculation was “entirely short-sighted”.

"High-spending tourists don't just buy luxury goods; they contribute to the whole of the economy, spending in hotels like mine, theatres, restaurants, cafés and on taxis and public transport," Forte added.

It is understood the government has drawn comparisons with the US, which does not have a country-wide VAT-free shopping system but remains a top destination for high-spending Chinese tourists.

UKHospitality previously said the original decision to remove tax-free shopping had not considered the impact that deterring people coming to the UK to shop would have on the wider tourism economy.

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