VAT Refund Advantage Coming to an End for UK Shoppers

The days are numbered for tourists seeking VAT refunds on luxury vacation purchases in the UK. Effective January 1, 2021, travellers to the UK will no longer enjoy the advantages of duty-free and VAT-free shopping. For those of us who include luxury handbag shopping in our vacation plans and budgets, this is a big deal. At least it will be, once our international travel resumes.

Picture this scenario: You’re in London and pop into boutiques like Hermès, Chanel, Louis Vuitton, or any of your other favorite brands. That handbag you’ve been ogling online, or elsewhere, is available. You buy it. So far, it’s just like any other shopping day. But, when you’re American, you also get the benefit of avoiding the VAT tax. Typically these boutiques do not deduct it from the cost but they give you the paperwork to file for a refund at the airport or elsewhere. It’s a substantial deduction and makes a purchase abroad even more attractive (beyond the experience and memories). The system worked like this for years and is a reason many plan for shopping abroad. Some folks even say they go abroad precisely for this reason.

As of January 1, 2021, that advantage will no longer exist for UK shoppers or for folks bringing items to the UK. It’s part of a larger government effort to limit duty-free shopping. It affects duty-free shopping for fashion, accessories and beauty at the airports, as well as other locations. Alcohol and tobacco products may still be sold duty free at the airport.

There is, however, one exception. Goods shipped to an overseas address – incurring shipping costs – will be entitled to VAT refund.

This impending change will make the UK the only country in Europe not offering VAT refunds to non-EU residents. Will it affect your future travel plans?

Chinese tourists at UK VAT

Photo Courtesy: Wang Mingjie via Chinadaily.com

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