This December, when the Brexit transition ends, the UK government is set to abolish the VAT RES, much to the dismay of the retailers. So, what exactly is VAT RES, you may ask. Well, in simple terms, it is the tax-free shopping where you claim a VAT refund for international travelers who purchase goods in the UK but take it home. Do note that this doesn’t apply to the services consumed in the UK. The new VAT calculator helps you with the calculation of VAT on your invoices and also provides a ready reckoner on the VAT rates.
The announcement from the government will have a major impact on the duty-free and VAT shopping models. The business owners have predicted that these will have a serious impact on the retail, travel, and tourism businesses. An important thing to note is the UK is expected to be the only European country abolishing tax-free shopping for international visitors. Let’s understand the VAT and duty changes being implemented along with the reasons penned by the officials.
VAT and duty changes
· International visitors going home from the UK will no longer be able to purchase electronics and clothing at tax-free rates at the airports. The reason to abolish this is that there were concerns about VAT not being passed on to visitors at the airports.
· An end to the VAT Retail Export Scheme. International visitors cannot claim VAT refunds on the goods purchased to be carried as hand luggage. However, you can ship the tax-free goods overseas with the added burden of shipping costs and an additional delay in receiving the goods. To understand better, use the new VAT calculator to determine the costs of your purchases. The concern cited was that the HMRC became overburdened and was costlier to operate.
· Duty-free products like alcohol and tobacco can be purchased by British travelers moving to EU countries in airports and international train stations. This is targeted in eyeing the sales of these products at the airports. For visitors from non-EU countries, the allowance will be increased significantly for alcohol, tobacco, and other duty-free products. From 1st January 2021, the allowed personal allowances for imports into Great Britain which would be duty-free are 42 liters of beer, or 18 liters of still wine. Additional allowances include 9 liters of sparkling water, or 4 liters of spirits. Or, any other beverages with 22% ABV and lesser. For tobacco, it is 50 cigars, 100 cigarillos, 200 cigarettes, 200 sticks of tobacco for heating, 250 grams of tobacco, or a proportional combination of these.
This new plan of changing the VAT and duty-free shopping hasn’t gone well with the retailers and other business majors. They have expressed their concerns on the significant impact on leisure, retail, tourism, and manufacturing industries to the Treasury. They believe these new reforms will further push the international visitors to shop online, and feel that the government is being “short-sighted”. Not only is it seen impacting the businesses, but the associated jobs are also at stake and the UK’s competitive advantage may be at risk in Continental Europe.