UK Conservatives pledge to restore tax-free shopping for tourists

The UK Conservative Party has pledged to restore tax-free shopping for tourists from outside the European Union. Party leader Kemi Badenoch and shadow culture secretary Rebecca Paul announced the policy during a visit to Bicester Village, a designer outlet shopping centre popular with tourists.

The Conservatives said VAT refunds would first return for eligible visitors from outside the EU. If evidence shows the scheme pays for itself, the party said it would extend the policy to EU visitors by the end of the next Parliament.

The scheme scrapped in 2021

The VAT Retail Export Scheme was scrapped for non-EU visitors in 2021 under the previous Conservative government. It was also not extended to EU visitors; the scheme allowed overseas tourists to claim VAT refunds on goods bought in Great Britain and taken home in their luggage.

Badenoch, then a Treasury minister, previously described the relief as costly and not beneficial to the whole of Great Britain. She now argues that the policy drives shoppers to rival European cities because purchases there cost less.

Estimated tourism boost

The Conservatives cited research by the Centre for Economics and Business Research. It estimated that fully restoring tax-free shopping could attract up to 2.35 million extra visitors and generate £4.1bn in additional spending.

The research also estimated that every £1 of VAT refunded could generate £1.54 in other taxes. The party said the change would support shops, hotels, restaurants and the wider tourism industry.

Funding the proposed return

The Conservatives said the scheme would be funded partly by tackling NHS health tourism, including more consistent charges for patients ineligible for free treatment. Their proposals also include minimum debt-recovery targets and requiring debts to be repaid before visa applications or renewals are considered.

The remaining costs would come from a package of savings announced by the party last year.

Labour called the pledge a “spectacular U-turn”. The British Retail Consortium backed a modern tax-free shopping scheme, saying it could attract international spending and support jobs and investment.