• Published

The Conservative Party has pledged to bring back tax-free shopping for tourists from outside the European Union.

The Tories said the decision to scrap the scheme in 2021 left the UK less competitive than European destinations.

Leader Kemi Badenoch, who was a Treasury minister when the tax relief was abolished, said businesses were being "let down by a tax policy that is chasing their customers away".

But Labour accused the party of "a spectacular U-turn".

The VAT Retail Export Scheme - which allowed overseas visitors to get a VAT refund on items they had bought in Great Britain and took home in their luggage - was scrapped for non-EU visitors under the previous Conservative government in 2021, while it was also not extended for EU visitors.

At the time, Badenoch said it was "a costly relief which does not benefit the whole of GB equally".

However, the Conservatives have now set out plans to restore VAT refunds for eligible visitors from outside the EU.

The party said that if evidence confirms the scheme "pays its way", this would be extended to visitors from the EU by the end of the next Parliament.

It said the cost of reintroducing the scheme would be offset by cracking down on "NHS health tourism", including more consistent charging of patients ineligible for free treatment, minimum recovery targets for debts and requiring full repayment of debts before visa applications or renewals will be considered.

The remaining costs would be funded from a package of savings set out by the Tories last year.

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The party also argued the move would benefit shops, hotels, restaurants and the wider tourism industry.

It pointed to research by the Centre for Economics and Business Research (Cebr), which suggested fully restoring tax-free shopping for tourists could attract up to 2.35 million extra visitors and generate £4.1bn in extra spending.

The report from earlier this month also estimated that for every £1 of VAT refunded, this could generate £1.54 in other taxes.

Badenoch said: "We have iconic retailers, inventive designers and brilliant manufacturers, but they are being let down by a tax policy that is chasing their customers away.

"Holidaymakers are choosing rival cities in other countries for the simple reason that it saves them money."

Businesses have long called for tax-free shopping for tourists to be reintroduced, arguing they are at a disadvantage to other European countries.

EU countries offer VAT refunds for non-EU visitors, while other European countries such as Switzerland have similar schemes.

Helen Dickinson, chief executive at the British Retail Consortium, said: "Introducing a modern tax-free shopping scheme would help attract more international spending to the UK, supporting high streets, jobs and investment in towns and cities across the country.

"Done properly, it would boost economic growth and deliver a net benefit to the Exchequer."

However, a Labour spokesperson said: "Kemi Badenoch used to say tax-free shopping was a costly giveaway and now she's trying to sell it as an economic miracle.

"If they really think it's such a great idea, they should explain why they scrapped it in the first place and how they'd pay for bringing it back."

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