UK Retailers should be aware that the Retail Export Scheme, which allows retailers to provide VAT refunds to overseas shoppers, is coming to an end as of 31 December 2020.
What is the Retail Export Scheme?
The Retail Export Scheme currently allows international visitors to obtain VAT refunds in respect of the goods they purchase when they visit the UK.
In the past the scheme was unwieldy – requiring forms to be completed when the goods were purchased and then those forms being certified by HMRC at the port/airport when the visitor removed the goods from the UK. The scheme was voluntary and therefore many businesses did not use it.
However, the scheme remained popular with shops in tourist regions, outlet centres, luxury goods retailers and shops such as major department stores like Fortnum & Masons, Selfridges, and Harrods, which can be considered tourist destinations in their own rights.
A few years ago, the Government floated the idea of digitising the procedure to make it more streamlined. However, when the Brexit transition period comes to an end the scheme will instead be withdrawn.
The treasury announcement setting out the withdrawal of the scheme sets out that shops can still zero rate goods sold to overseas customers if the shop organises the export of the goods from the UK (i.e. arranges for the goods to be sent from the shop to the overseas customer’s address).
Those businesses which currently use the scheme will need to carry out the following actions in order to be ready for the change. Firstly, they will need to be aware that the scheme no longer applies. A policy decision will then need to be made as to whether the shop will be willing to export goods directly to customers’ overseas addresses. This will require the business understanding the export process (including obtaining an EORI number in order to make export declarations as well as obtaining the relevant evidence to support zero rating).
The decision as to whether to offer to export goods or not is likely to be dependent on the extent of business that was previously made under the retail export scheme.
The change is likely to mean that staff will need guidance on how to deal with queries from overseas visitors. This will either be guidance on what to say to customers to explain that tax free shopping is no longer available or training as to what to do in order to send the goods out as exports.
For more information on the withdrawal of the retail export scheme, please get in touch to see how we can help.