Travel, particularly international travel, has changed considerably in the wake of Covid-19. But one of the biggest and most recent surprises is the UK government’s changes to its VAT and duty-free shopping schemes. The post-Brexit trade agreement between the UK and the EU was finalised on Christmas Eve 2020. With these changes, the UK is now slated to be the only country in Europe that does not offer tax-free shopping to tourists, a move that could negatively impact tourism, retail, leisure and manufacturing.
What is VAT and duty-free shopping, and how could this impact your purchases when traveling?
VAT is an acronym for “Value Added Tax” and it’s a tax imposed by the British government that applies to just about everything. Unlike sales tax, VAT is already included, so the price you see is the price you pay at the register – there’s just an “invisible” 20% tax built into the price.
Duty-free is slightly different. These are stores in airports and ports at sea that sell a variety of different items. Many times you will see luxury goods for sale, and the stores do not charge the national sales tax on these items. While this was lucrative in the past, duty-free stores do not always offer the best deals anymore.
How the new VAT changes impact visitors
The changes to both VAT and duty-free went into effect on January 1st, 2021 and will impact travellers in the following ways:
- Previously, visitors, vacationers, and travellers who purchased goods in the UK and brought them back home were able to claim a refund on the VAT on those items. As of January 1st of 2021, this has gone away.
- Additionally, travellers from the UK going to non-EU countries will no longer be able to purchase tax-free goods at the airport, so try not to forget to pack your electronic devices or neck pillow.
- Finally, the VAT Retail Export Scheme will be no more, meaning overseas visitors can only obtain VAT-free items in the store and have them shipped directly to their home address. This means the customer not only incurs shipping costs but also has to wait to get home to enjoy their purchase.
But there are some good things to come out of the deal as well. Thanks to changes in the customs rules, travellers, visitors and tourists who enter the UK from non-EU countries will see a significant increase in their overall personal allowance.
For instance, purchase limits of up to 42 litres of beer, 18 litres of wine, and up to 200 cigarettes are just some of the perks that have come out of the changes.
If you’re planning on traveling in the near future and want to know how these changes may impact your purchases, this handy calculator will be of use.
Ministers in the UK are still facing much resistance to the new legislation, and many different groups are calling for them to reverse the decision that got rid of VAT-free sales in the first place. Many argue that the duty and VAT-free system would significantly boost support to ports and airports which were hit quite hard in 2020. The discussion is likely to be ongoing with civil servants and ministers well into 2021.