The Conservatives have pledged to restore VAT refunds for overseas visitors shopping in Great Britain, five years after the scheme was withdrawn. The party puts the cost at £540 million a year and claims it would draw 2.35 million more visitors and £4.1 billion of extra spending. Retail bodies have backed the plan, and the Treasury has rejected it.
The VAT Retail Export Scheme let visitors from outside the country reclaim VAT on goods they took home with them. It was withdrawn across Great Britain in 2021, and retailers in city centres and tourist destinations have campaigned for its return since.
The pledge, set out by Conservative leader Kemi Badenoch, would reinstate refunds for non-EU visitors first, with EU visitors added later if the evidence supports it, and would be completed by the end of the next Parliament.
The figures the party has put on it
The Conservatives cost the measure at £540 million a year and set against it 2.35 million additional visitors and £4.1 billion of additional spending. The party proposes to meet part of the cost through tighter enforcement against what it calls health tourism.
The figures are the party’s own and carry no published methodology, which sets them apart from the underlying trade data: spending by international visitors remains 8% below its pre-pandemic level even as visitor numbers have recovered. Unverifiable projections are a recurring problem for anyone assessing a business case, and being the right candidate to open a franchise applies the same test to franchisor forecasts.
Where the scheme still runs, and where it does not
The withdrawal was not UK-wide, and the distinction matters to any operator with sites on both sides of the Irish Sea. HMRC guidance states that the VAT Retail Export Scheme is no longer available in Great Britain, meaning England, Scotland and Wales.
In Northern Ireland it continues to operate, for visitors whose home is outside both Northern Ireland and the EU, provided the goods are exported within three months. A traveller moving from Northern Ireland into Great Britain normally gets no refund, because UK VAT has already been charged and import VAT falls due.
Good to know
VAT is UK-wide, but this scheme is not. The Retail Export Scheme still runs in Northern Ireland and was withdrawn in England, Scotland and Wales. A network quoting one refund position across its whole estate is describing two different regimes as one, the same divergence that runs through UK franchise law: how England, Scotland and Northern Ireland differ.
Retailers back it, the Treasury does not
Support has come from retail trade bodies and from operators including Fortnum and Mason, Watches of Switzerland and Charles Tyrwhitt. Helen Dickinson, chief executive of the British Retail Consortium, said the country faces a clear disadvantage against competing destinations.
A Treasury spokesperson responded that the UK remains one of the most-visited countries and pointed to the VAT relief already available where a retailer ships goods abroad as an export. Labour has said Badenoch once called tax-free shopping a costly giveaway.
What would have to happen next
This is an opposition commitment, not a measure before Parliament, so nothing changes for retailers in the current tax year. Restoring the scheme would require primary legislation and a Treasury costing, and the party has tied delivery to the end of the next Parliament rather than to a Budget date.
For networks trading in tourist destinations, the signals to watch are whether the Government responds with its own costing and whether the measure appears at the next fiscal event. Brands recruiting operators for those locations can be compared across the UK franchise directory.
