Chancellor urged to bring back VAT-free shopping

According to a report, the chancellor could give the economy an ‘instant boost’ by reintroducing VAT-free shopping for international tourists.

Jeremy Hunt would collect an additional £350 million a year in tax revenue by reintroducing the measure, research by economic forecaster Oxford Economics found.

VAT-free shopping allows foreign visitors to claim back 20 per cent of their UK purchases.

It was scrapped by then Chancellor Rishi Sunak when the UK left the EU in 2021.

Former Chancellor Kwasi Kwarteng tried to reintroduce the split in September’s mini-budget, but the move was reversed by Hunt weeks later.

It left the UK as the only European country not to offer VAT-free shopping to international visitors.

This has fueled concerns that wealthy Chinese, Middle Eastern and American shoppers will reject shopping destinations such as London and Manchester in favor of Milan and Paris.

At the time, the government claimed that removing the tax break would save £2bn a year. But Oxford Economics said the government’s estimate is “inaccurate.”

The study, seen by the Daily Mail, said the Treasury failed to account for the increased number of foreign visitors the scheme would attract.

It said 1.6 million more tourists would come to the UK to take advantage of VAT-free shopping, with £4.1bn spent on hotels, restaurants and other attractions.

The benefit of the higher expenditure would more than outweigh the cost of VAT refunds. Conservative MP Sir Geoffrey Clifton-Brown, deputy chairman of parliament’s spending watchdog, said the Chancellor should consider a policy reversal.

Last week, Brian Duffy, boss of luxury watch retailer Watches of Switzerland, said scrapping the plan was “short-sighted.”