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Kemi Badenoch pledges return of tax-free shopping for tourists

The Conservative leader claimed that retailers were being “let down by a policy that is driving their customers away”

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The Conservatives have claimed that scrapping the VAT refund scheme for international visitors in 2021 left the UK “less competitive” than its European counterparts.
The Conservatives have claimed that scrapping the VAT refund scheme for international visitors in 2021 left the UK “less competitive” than its European counterparts. Picture: Getty

By Isobel Anderson Morris

Kemi Badenoch has pledged to bring back tax-free shopping for tourists, reversing a post-Brexit rule change.

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The Conservatives have claimed that scrapping the VAT refund scheme for international visitors in 2021 resulted in the UK being “less competitive” than its European counterparts as the country left the EU.

Mrs Badenoch, who was a Treasury minister when the scheme was abandoned, said retailers were being “let down by a policy that is driving their customers away.”

The pledge has been welcomed by business chiefs, including those at Paul Smith and Fortnum & Mason, who described the policy reversal as both “pro-growth” and “pro-jobs”.

While the number of visitors to the UK has returned to pre-pandemic levels, their spending in real terms remains lower.

According to estimates from tourism agency VisitBritain, based on 2024 data, visitor spending is 8% lower than before the pandemic.

Read more: Badenoch has 'instructed lawyers' to dispute cuts to Tory-run council

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According to estimates from tourism agency VisitBritain, based on 2024 data, visitor spending is 8% lower than before the pandemic.
According to estimates from tourism agency VisitBritain, based on 2024 data, visitor spending is 8% lower than before the pandemic. Picture: Getty

The Conservatives said reintroducing the VAT refund would be partly offset by a proposed “crackdown” on so-called “health tourism”, including more consistent charging of patients who are ineligible for free treatment.

Tax-free shopping could also be made available to tourists travelling from EU countries, where supported by evidence, with the Conservatives saying the policy would be introduced by the end of the next Parliament.

In a joint statement backing the pledge, business leaders said: “As some of the leading businesses in tourism, retail and hospitality, we welcome this pro-growth, pro-jobs announcement from Kemi Badenoch and her team

“With its heritage and the quality of our products and service, Britain is well placed to compete with the world’s finest destinations. The restoration of tax-free shopping for tourists will allow us to win back those who may have taken their custom elsewhere in recent years. When taking the full economic benefits and other taxes paid into account, we believe this will be a net benefit to Britain.”

Mrs Badenoch added: “Britain should be the place where the whole world comes to shop.

“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.

“British retailers are closing down shops with the knock-on effects damaging small manufacturers, suppliers and jobs across the UK. I want them to know I’m on their side and Conservatives will sort out taxes so companies can create jobs and grow our economy.”