Sunak warned ending VAT-free shopping for tourists a ‘clear and present risk’

Plans to scrap VAT-free shopping for overseas visitors to the UK pose a “clear and present risk” to the retail sector, business leaders in Scotland have warned the Treasury.

They have written to Chancellor Rishi Sunak to demand he “urgently reconsiders” axing the scheme – which allows international tourists to reclaim the VAT on goods which are purchased, but not consumed, in the UK.

The Scottish Government has already urged Mr Sunak to think again on the issue.

The latest plea comes as the retail sector is hit by coronavirus, with the business leaders warning that ending VAT-free shopping will “drive away” some of the “very price-sensitive international tourists who come to Scotland”.

The group – which includesScottish Chambers of Commerce chief executive Liz Cameron, Scottish Retail Consortium director David Lonsdale and Scottish Tourism Alliance chief executive Marc Crothall – now wants the Chancellor to consider the impact the change will have on businesses and “particularly employment in Scotland”.

Willie Macleod, executive director for Scotland at UK Hospitality, has also signed the letter, along with bosses from firms including jewellers ROX and Hamilton and Inches, and upmarket retailers at the House of Bruar in Perthshire and Harvey Nichols in Edinburgh.

They told the Chancellor that while the coronavirus pandemic has been “hugely challenging” for the sector, they have “worked hard to adapt and protect as many jobs as possible”.

They added: “That is why we are deeply concerned at the Treasury’s decision to abolish the VAT Retail Export Scheme and airside extra-statutory concession supporting tax-free shopping for international tourists from the beginning of next year.

“At a time when both Westminster and Holyrood have been making efforts to help businesses survive, this represents a clear and present risk of reduced sales for the retail and other industries, together with overall tax revenues to the Scottish and UK Exchequers.

“The changes will drive away a number of very price-sensitive international tourists who come to Scotland to shop, stay in prime visitor accommodation, and enjoy our fantastic cultural venues at the same time.

“Many of these tourists may begin their holiday in Edinburgh or Glasgow but then head across Scotland to Stirling, Perth, the Borders, Inverness, Skye, or many other places besides.

“We respectfully submit that further consideration should be provided by HM Treasury to the full impact upon business, particularly employment in Scotland.”

An Treasury spokesman said: “Around 92% of visitors to the UK don’t use the VAT Retail Export Scheme and extending it to the EU could increase total costs up to £1.4 billion a year.

“The VAT Retail Export Scheme is very unlikely to act as a significant motive for visiting the UK. For the minority who do use the scheme, administration fees are often substantial, and tax-free shopping is still available in store when goods are posted to overseas addresses.

“Countries like New Zealand and Canada remain popular tourist destinations without using the scheme.”