Editor’s Update as of Oct 17th, 2022.
In disappointing news for UK luxury brands and customers from abroad, the UK has reversed course on its plan to reinstate the VAT refund (see below). Just last month, then Chancellor of the Exchequer Kwasi Kwarteng announced that non-UK shoppers would once again be able to claim back the VAT tax. Luxury brands hailed the decision, as a boost to tourism and shopping. After all, for, let’s say Americans, why shop in London when the cost is effectively 10-15% lower in Paris.
Last week, however, New Prime Minister Liz Truss suddenly fired Kwarteng, appointing Jeremy Hunt as replacement. Hunt just announced cancellation of the VAT refund, as well as reversal of many other tax initiatives. As you’d expect, luxury brands are displeased and concerned about the effect on their business.
Original article published Sept 24th, 2022.
UK Reinstates VAT Refund Policies for Overseas Tourists
Did you hear the collective sigh of relief from UK luxury outposts?
The UK just reversed its elimination of VAT refunds for overseas shoppers. British Chancellor of the Exchequer Kwasi Kwarteng announced that as part of the government’s fiscal package, VAT refunds would be reintroduced as soon as possible for overseas tourists.
As quoted in the Financial Times, he promised:
“a modern, digital, VAT-free shopping scheme” enabling visitors to obtain VAT refunds “on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage”.
As you may recall, effective January 2021, the UK dropped the tax refund advantage at the same time that it might have applied to EU visitors due to Brexit. Effectively that meant that while, for example, American shoppers in Paris and Rome could recoup the VAT paid when returning home, those visiting the UK could not.
Put another way, currency issues aside, it became less expensive for non UK tourists to buy on the continent. For those who include luxury shopping as part of their travels, it was and is a big deal. When you consider that the VAT refund for brands like Hermès, Chanel, and Dior is around 12%, it adds up to real money saved.
The luxury sector, duty-free shops, and businesses catering to tourists were not happy about the 2021 change. However, conceivably the impact on tourism was felt less in the height of the pandemic as few were traveling at all.
But this past summer, as Americans flew overseas in droves, they also engaged in major shopping sprees throughout Europe. Paris, Greece, and Italy were particular hot spots for instagram pics. London less so, though it’s hard to tie it directly to VAT issues.
Read:
Shopping Implications for the Dollar and Euro Approaching Parity
Buying a Chanel Classic Flap at the Flagship in Paris and the Savings
Terminal 5 Heathrow airport.
London’s International Heathrow airport was once considered the mecca for luxury shopping but with the absence of VAT refunds many saved their purchases for other European destinations.
Yesterday September 23rd, the pound plunged and hit its lowest in 37 years against the dollar, spurring conversations and headlines about the potential future parity with the euro and the dollar.
With King Charles’ upcoming coronation, no doubt the UK is expecting an influx of tourists from parts far and wide. It could be nice for the British economy if visitors also did a bit of shopping while there.
Did the elimination of the VAT refund affect your travel choices? And will its return inspire you to head to the UK now? Let us know.
Read related articles:
A London Hermès Client Shares Her Experience Getting Her First Quota Bag
Her Majesty: The Queen of Hermès Scarves
Queen Elizabeth’s Loyalty to Launer Handbags
Buying a Chanel Classic Flap at the Flagship in Paris and the Savings
How To Declare Your Hermès Purchases from Paris and Still Save Money
Which is the Better Deal? Shopping in the UK or France? Here’s the Handbag Math
Love, PurseBop
XO
Updated: October 17th, 2022
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