The Conservative Party has announced plans to reinstate tax-free shopping for tourists from outside the European Union. Tory leader Kemi Badenoch, who previously served as a Treasury minister, stated that the elimination of the scheme in 2021 has made the UK less competitive compared to European destinations. Badenoch remarked that businesses are being 'let down by a tax policy that is chasing their customers away.'
The VAT Retail Export Scheme, which allowed overseas visitors to claim VAT refunds on purchases made in Great Britain, was discontinued for non-EU visitors under the previous Conservative government in 2021. At that time, Badenoch described it as 'a costly relief which does not benefit the whole of GB equally.'
The Conservatives are now proposing to restore VAT refunds for eligible visitors from outside the EU, with potential plans to extend this to EU visitors if the scheme proves financially viable by the end of the next Parliament. The party indicated that the costs of reintroducing the scheme would be mitigated by measures to address 'NHS health tourism,' including stricter charging for ineligible patients and requiring debt repayment before visa applications or renewals.
The party also referenced research from the Centre for Economics and Business Research (Cebr), which estimated that restoring tax-free shopping could attract an additional 2.35 million visitors and generate £4.1 billion in extra spending. Badenoch emphasized the need for a competitive tax policy to retain holidaymakers who currently prefer rival cities abroad.
Helen Dickinson, chief executive of the British Retail Consortium, supported the proposal, stating that a modern tax-free shopping scheme could enhance international spending in the UK, benefiting local economies. However, Labour criticized the Conservatives' reversal, with a spokesperson questioning the rationale behind the initial scrapping of the scheme and the funding for its reintroduction.