UK brings back duty-free shopping, VAT refund scheme

Overseas visitors to the UK will one again be able to enjoy duty-free shopping and a refund of the VAT sales tax.

The British government controversially scrapped almost all duty free sales and VAT tax refunds for visitors from January 1 2021, saying the scheme cost over £1bn in lost revenue.

But an overnight ‘mini-budget’ championed by newly-appointed PM Liz Truss will see VAT-free shopping for overseas visitors make a comeback.

“Britain welcomes millions of tourists every year and I want our high streets and airports, our ports and our shopping centres to feel the economic benefit,” said chancellor Kwasi Kwarteng.

“So we have decided to introduce VAT-free shopping for overseas visitors.”

This will crucially include residents of EU counties, who are now expected to become a major contributor to duty-free sales on visits to the UK.

Kwarteng said the move would benefit retailers and help break the "cycle of stagnation” in the British economy.

“We will replace the old paper-based system with a modern, digital one,” Kwarteng added – although that’s not likely to see the full 20% VAT handed back to visitors, as the Tory government would typically favour delivering the refund through private-sector agencies which would take their cut as a service fee.

While Kwarteng promised the VAT refund scheme would be “in place as soon as possible”, he said a consultation process would “gather views on the approach and design of the scheme” before it was launched in 2024-25.