Retailers welcome return of VAT-free shopping for tourists, but urge action on business rates

Retailers in the UK have welcomed the government’s decision to bring back VAT-free shopping for overseas visitors, but called for urgent action on business rates.

It comes after the UK’s new chancellor Kwasi Kwarteng revealed a mini-budget on Friday to reinvigorate the country’s struggling economy.

It included the return of VAT-free shopping for tourists, something the retail industry had been urgently calling for since it was scrapped at the start of last year.

Grosvenor Property UK chief executive James Raynor welcomed the “sensible re-induction of tax free shopping for tourists” which he said would “allow us again to compete more effectively with Paris and Madrid and provide a much needed boost to the economy”.

Dee Corsi, the interim CEO at New West End Company, said the decision was “a great victory for London's International Centres”.

Business rates

Helen Dickinson, the chief executive of the British Retail Consortium (BRC), also welcomed the news, but said the budget lacked any mention of a business rates reform.

Business rates are taxes charged on most non-domestic properties. Many retailers consider them to be unfairly calculated as they benefit online giants without physical store estates.

Dickinson said: “Retailers are facing immense cost pressures, not just from energy bills, but also a weak pound, rising commodity prices, high transport costs, a tight labour market and the cumulative burden of government-imposed costs.”

John Webber, the head of business rates at Colliers, said it was “disappointing” that business rates - which he describes as “the elephant in the room” - were “largely ignored, despite the impact that ultra-high rates bills have had on businesses in recent years”.

Other updates in the mini-budget included the cancellation of a planned corporation tax rise from 19 percent to 25 percent, and a cut to the basic rate of income tax from 20 percent to 19 percent in April 2023 - one year earlier than planned.

The government also announced a cut to stamp duty, and the reversal of a planned National Insurance hike.