UK’s VAT Retail Export Scheme: What It Is and What Its End Will Bring About

UK’s VAT system has everyone in the United Kingdom paying tax on mostly all of their purchases. However, the VAT Retail Export Scheme allows people in certain categories to claim a VAT refund against their purchases. Essentially, this means that goods purchased are tax-free and the scheme, for this reason, is also known as Tax Free Shopping.

Not everyone living in the UK has access to the scheme though. Certain individuals that can fulfil certain requirements laid down by the government are the sole incumbents of Tax Free Shopping. The requirements are as follows:

Overseas Visitors:

An overseas visitor under the UK VAT retail export scheme is described as a person visiting the country from beyond Britain’s borders. They are people who are not living in the UK on a permanent basis. He or she,

• Should not have a domicile in the UK or within the European Union
• Should leave the country while in possession of the goods purchased within 3 months from the date of purchase.
• Should have to goods, the VAT refund document and related receipts on them while exiting the country

Further conditions have been laid down for people to capitalize on tax-free Shopping. These are:

• Purchase should be made in person and the VAT Retail Export Scheme form duly filled and submitted to the retailer
• The stamped copy of the form, from the department of customs should be sent to the retailer as evidence that the purchased item has left the country. This serves as an officially approved invoice.
• Once the VAT is refunded, the retailer can zero rate the supply.

It is best to make note of purchases and work out VAT correctly to avoid any confusion.

End of VAT Retail Export Scheme:

The treasury depart of the UK government has officially declared the VAT Retail Export Scheme scrapped by 2021. This has not gone well with businesses that rely heavily on tourists coming into the country. The entities that will lose heavily are the businesses located at London’s West end. Other areas that heavily profit from the scheme is the Bicester Village in Oxfordshire. In fact, these areas hoped for an inclusion of tourists that belong to the European Union as well since this would boost their businesses many times more.

Many countries in Europe have similar VAT Retail Export Schemes in place and have been benefiting from the scheme abundantly. The UK has been the first to declare an end to the scheme and it is estimated that 600 retailers in London alone will be affected.

In fact, many see it as a body blow to the UK economy. An end to the VAT Retail Export Scheme would discourage people all over the world from visiting Britain. A loss to the tune of 5.6 billion pounds is expected to hit the economy as a result of the end of the scheme. This comes at a time when world economies are already reeling under extreme economic stress.

The decision is set to leave a deep scar on the economy of the UK. Negative impacts are expected to hit the tourism industry, hotels, restaurants and other cultural attractions across the UK.