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Changes to retail exports and duty-free shopping

17 September 2020: Duty-free shops will return from 1 January 2021, but international visitors to Great Britain will no longer be able to buy and take with them tax-free purchases from other retailers in the country as the VAT retail export scheme is scrapped.

HM Treasury and HMRC have published their response to the consultation on the potential approach to duty- and tax-free goods arising from the UK’s new relationship with the EU.

The document announces the end of the VAT retail export scheme from 1 January 2021. This means that international visitors will no longer be able to obtain a VAT refund on items that they buy in Great Britain and take home with them in their luggage.

However, the ability to have goods shipped directly from the retailer to the overseas address of the customer without the addition of VAT will remain, and from 1 January 2021 will be extended to include addresses within the EU. This is expected to reduce the scope for fraud where goods are purchased without VAT for export, but never leave the country.

The document also announces new duty-free rules that will allow limited quantities of goods to be imported for personal use, without being subject to UK VAT or duty. This will operate in a similar way to that in which duty-free shops used to operate up to 30 June 1999, although with some increased limits. The duty-free limits will be the same, regardless of whether the goods are being imported from inside or outside the EU.

The duty-free personal allowances for imports into Great Britain from 1 January 2021 will be as follows:

Alcohol

  • 42 litres of beer,
  • 18 litres of still wine, and
  • 4 litres of spirits or 9 litres of sparkling wine, fortified wine, or any alcoholic beverage less than 22% ABV.

Tobacco

  • 200 cigarettes, or
  • 100 cigarillos, or
  • 50 cigars, or
  • 250g tobacco, or
  • 200 sticks of tobacco for heating, or
  • any proportional combination of the above.

Any other goods

  • To the value of £390, or £270 if travelling by private plane or boat.

ICAEW’s Tax Faculty understands that the rules for Northern Ireland are still under discussion.

Passengers travelling from Great Britain to the EU will be able to purchase duty-free goods at airports, ports, and international rail terminals. This means passengers travelling to the EU won’t have to pay UK tax and excise duties on alcohol and tobacco products which they purchase and take abroad with them in their luggage.

They will also be able to purchase duty-free goods on board planes on international routes, on international train journeys and ships sailing from Great Britain for destinations outside the UK for consumption on board and to take away.

However, the airside extra statutory concession that allows for the tax-free purchase of non-excise goods to passengers travelling to non-EU countries will be withdrawn from 1 January 2021. This is because of concerns that the tax saving on goods such as electronics and clothing is not always passed on to consumers and that tax-free goods are brought back into the country by UK residents, putting high street retailers at a disadvantage. 

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