British MPs join fight to stop Rishi Sunak scrapping duty-free shopping

Letter from 40 Conservatives warns the move will 'damage' UK's global ambitions

Duty-free shopping at Heathrow Airport in London. Industry bodies had expected the government to extend the tax-free scheme to include EU nationals once the Brexit process was completed. Prisma by DukShow more

More than 40 Conservative MPs have warned UK finance minister Rishi Sunak that cutting VAT-free shopping could cost up to 50,000 jobs.

In a letter sent to Mr Sunak, the MPs said the decision to scrap the system on December 31 at the end of the Brexit transition period will make Britain less attractive to international visitors.

The MPs wrote that the any tax rise could "set back the Government’s levelling-up agenda and damage our ambitions for a global Britain”.

The group also said wealthy visitors they describe as ‘super spenders’ will desert London for Paris and Milan.

Scrapping the UK’s duty-free scheme will prevent non-EU visitors from receiving a VAT refund on items they buy in Britain and take home in their luggage. It will also stop tax-free sales on goods such as clothes, electronics and perfumes bought at airports. VAT in the UK currently stands at 20 per cent.

The MPs' letter comes a week after a group of luxury brands, including fashion icon Gucci, jeweller Tiffany and diamond specialist De Beers, urged the British government to abandon plans to end tax-free shopping in the country, because it will cost the economy billions "at the worst possible time".

“The introduction of a 20 per cent tax will result in these visitors opting to spend their money elsewhere in Europe rather than in the UK. We believe that in the midst of the economic disruption caused by the global pandemic this would be the worst possible time to disincentivise visitors from coming to the UK,” the letter signed by 11 brands said.

Industry bodies had expected the government to extend the scheme to include EU nationals once the Brexit process was completed. British holidaymakers will also be hit by extra taxes at the airport till as savings for travellers leaving the UK will be limited to tobacco and alcohol.

Earlier this month, Heathrow, Britain’s biggest airport, said it was preparing a legal challenge against the government’s decision to scrap VAT-free shopping for international tourists on goods such as perfume, clothes and electronics.

Heathrow's chief executive, John Holland-Kaye, also sent a letter to Mr Sunak, co-signed by tax refund specialist Global Blue and the World Duty Free Group, saying the airport wanted a judicial review of the decision to abolish the VAT Retail Export Scheme and withdraw airside tax-free shopping in all UK airports at the end of this year.

The airport said the decision to end duty-free shopping could cost tens of thousands of jobs throughout the aviation industry, with luxury products accounting for as much as three-quarters of total sales in airports.

The latest letter to Mr Sunak from Conservative MPs said the move could affect not just London, but airports, shopping centres and outlets throughout the country including in Edinburgh, Manchester and Bicester Village.

‘”We believe that the Treasury has overestimated the loss of VAT it will suffer from EU shoppers. If it’s not as attractive to come here, these shoppers will simply book into a nice hotel and go for a night at the opera in Paris rather than London,” said Geoffrey Clifton-Brown, who is leading the MPs.

With less than 10 per cent of non-EU visitors to the UK using the VAT refund shopping scheme, extending the scheme to EU visitors could cost up to £1.4 billion ($1.8bn) a year, according to HM Treasury, which also said airports do not always pass savings on to consumers and that the in-shop VAT refund scheme is "costly".

When the ban comes into place, overseas visitors will still be able buy VAT-items in stores and have them sent directly to their overseas addresses.