Leading UK Retailers Lose Confidence in Government Over Vital Digitalisation of Tax Free Shopping

  • Government’s slow progression away from dated paper system will deter foreign visitors, leading retailers warn
  • New West End Company says Chancellor must act now to ‘avoid further risks and uncertainty’
  • Tax free shopping is key tourist perk which contributes millions of pounds to UK economy every year
  • Failure to act will damage London and UK’s reputation as a global retail destination
  • UK is already falling behind international competitors ahead of separation from EU

Leading retailers, led by New West End Company, have this morning (23 October 2018) issued a stark warning to the Government that the UK risks a further loss of international competitiveness post-Brexit if it fails to act to modernise the tax-free shopping system.

New West End Company representing the world’s largest retail destination, along with major retailers and retail groups, have written to the Chancellor expressing concern about the Treasury’s lack of progress in implementing a vital new digital system.

The letter, signed by over 600 West End retailers represented by New West End Company and others, including the British Retail Consortium, Harrods, Bicester Village, major department stores and VAT refund operators, representing virtually  the entire UK tax free shopping industry, makes clear that they have lost confidence in the Treasury’s programme to digitalise tax free shopping. They claim the Government’s current preferred option, different from the global standard used in most other countries, is “an inferior product (which) will introduce additional risks and uncertainty”.

Tax free shopping in the UK creates around £2.5bn worth of retail sales a year from international  visitors  but the current paper-based system of claiming back tax refunds  is at breaking point.  Long queues at airports result in many visitors abandoning attempts to reclaim which damages Britain’s reputation. If the tax free shopping scheme is extended to EU member states when Britain leaves the EU, retailers believe the system will simply be unable to cope with demand.

The Government currently has plans to introduce a complex digital system, which have been in the pipeline since 2013, but five years later there is little progress. Last month HMRC once again set back the delivery date, now to 2020.

The letter recommends adopting a faster, cheaper and less risky system which would build on, rather than replace, the existing digital infrastructure, operated by retailers and their VAT Refunding Organisations (VRO). This would retain the direct links between retailers and their customers, which allows them to develop and grow their international sales.

Research by the Centre for Economics and Business Research (CEBR), commissioned by Global Blue, which manages tax free shopping refunds for retailers worldwide, has demonstrated that the Treasury much to gain from tax free shopping.  The research shows there is a net benefit to the Treasury of up to £1.90 for every £1.00 refunded with additional tax coming from greater visitor numbers and spending on other non-tax refundable goods and services, such as hotels, restaurants and transport.

The Commons Public Accounts Committee recently criticised HMRC’s record of delivering IT programmes on time, with the Chair, Meg Hillier MP, writing to the HMRC CEO last month expressing concerns over delays.

Sir Geoffrey Clifton-Brown MP, Vice-Chair of the Public Account Committee, who has been campaigning for a faster digitalisation of the tax free shopping system, said “The Public Accounts Committee has recently raised concerns about delays in HMRC IT projects. The Government needs to listen to retailers, who know their customers best, and come up with a new system that can be delivered quickly”.

Speaking on behalf of the signatories to the letter, Jace Tyrrell, Chief Executive of New West End Company said: “London’s two international shopping centres of the West End and Knightsbridge account for over 80% of tax free shopping in the UK.  Our retailers are frustrated at the time being taken to digitalise the system but are also worried about the negative impact of HMRC’s preferred model. It’s time for a total rethink to stop the UK falling further behind our international competitors”.

Helen Brocklebank, Chief Executive, Walpole, said: “Tax free shopping is a major draw for international shoppers buying luxury goods.  The current paper-based system is at breaking point and must be replaced quickly or the UK economy will suffer. We need a simpler, less disruptive approach than HMRC is proposing and we need it now”.

Jasmine Whitbread, Chief Executive of London First, said: “International visitors are spending billions every year in London’s stores, yet the UK is falling behind its competitors on how we manage tax free shopping. The last thing we want is to put off international visitors with long queues at exit ports. That’s why we should dump the outdated paper-based system and accelerate the move to a modern digital scheme to ensure tax free shopping is a positive experience for visitors and retailers alike.”

Derrick Hartman, Managing Director, Global Blue, UK and Ireland, said: “As well as introducing greater costs and risks, the HMRC preferred option would isolate the UK from the tested and accepted global system, severely damaging the growth of this important part of the UK economy”

David Perrotta, UK Country Manager of Planet added: “The international shopper is a key contributor to the UK economy. Improving the customer experience when shopping tax free, particularly at the airports by introducing digital stamping is vital to keeping the UK as a top tourist destination.”

The UK’s lack of progress with the digitalisation of tax free shopping is in sharp contrast with many other major shopping destinations across the globe such as France, Spain, Italy and Korea, which have announced and launched plans for a digital system within a maximum of 3 years.

The letter urges the Chancellor to meet with retailers to discuss the concerns and alternative proposals in more detail.

Read the letter here.

The full list of signatories to the letter are:

  • Jace Tyrrell, Chief Executive, New West End Company (West End retailers)
  • Helen Dickinson, Chief Executive, British Retail Consortium
  • Helen Brocklebank, Chief Executive, Walpole (British luxury industries)
  • Jasmin Whitbread, Chief Executive, London First
  • Kurt Janson, Chief Executive, The Tourism Alliance
  • Michael Ward, Chief Executive, Harrods
  • Ewan Venters, Chief Executive, Fortnum & Mason
  • Jose Luis Duran, Chief Executive, Value Retail (Bicester Village)
  • Derrick Hardman, Managing Director UK & Ireland, Global Blue
  • David Perrotta, UK Country Manager, Planet
Tue 23 October 2018