End of tax-free shopping: what is the impact on tourism?

Following Brexit, the UK removed tax-free shopping for tourists which is now having an impact on Britain’s prospects as an international shopping destination, new research reveals.

Formerly, when the UK was part of the EU, tourists from outside the EU were able to reclaim VAT on purchases made during their trip.

However, from 1 January 2021, the duty-free shopping scheme was abolished in the UK meaning that UK goods are now 20 per cent more expensive than countries still offering the VAT refund.

Prior to the end of the VAT refund scheme, the UK was a popular destination for international shoppers, with research from Global Blue (a shopping tax refund company) revealing that in 2019, Gulf state tourists spent an average of 24,000 euros (approximately £19,803) in the UK.

This figure dropped to £0 last year, with tourists opting to spend their money in EU countries (that still offer VAT refunds).

Of course, the past two years have had a major impact on the tourism sector with coronavirus-related travel restrictions limiting travel which is still having repercussions.

How will this affect your business?

Some small and medium sized businesses (SMEs) are heavily reliant on the additional income yielded from tourism and the Government have imposed measures to try and protect those impacted.

The Government outlined The Tourism Recovery Plan in June 2021 which aims to increase tourism levels.

By the end of 2022, the plan aims to boost domestics trips back to 2019 levels as well as increasing inbound visitor numbers to 2019 levels by the end of 2023.

To monitor the situation, the Digital, Culture, Media and Sport Committee are set to investigate how the retail and hospitality sectors can be shaped to do this.

Tomorrow (8 March 2022), a meeting relating to the Promoting Britain abroad agenda is going ahead, which will evaluate post-Brexit tourism and how to use tax freedoms to its advantage.

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