The 'Tax Free' Incentive

When we hear that term, “tax free”, it tends to grab your attention. Without a doubt, we are all likely to spend more if it is free of tax. That is why when you attach tax free to shopping, it encourages tourists to spend more on something special than they may otherwise. From my experience, this is always the case with duty free, in the same way, buying things outside of the airport which will be tax free will always be appealing.

The UK has long been a go to destination for tourists worldwide, even though it may not be as popular as France, Spain, US or Italy. But certainly, the UK is in the world’s top ten places to visit. Again, something everyone knows is that whenever we go abroad, we spend money, and post-pandemic, the number of visitors to the UK has increased with over 35 million tourists last year, with all of them contributing towards the £214 billion that the UK profits from tourism.

So, it must be good news, if VAT free shopping for tourists is going to be brought back for foreign visitors. The Chancellor has referred the change of profit decision to the Office for Budget Responsibility to decide the cost benefits. What is interesting is that this was one of the policies flagged by Liz Truss in her short stay as Prime Minister.

On the face of it, many sectors will benefit from this tax incentive, as it is not just retail and hospitality, but travel, museums and galleries. That is why it is easy to see that business leaders in those sectors have been campaigning for a change for a while.

It is easy to assume that this VAT free incentive may just benefit London, but from my experience, that when family and friends visit from abroad, they spend more money when it is tax free shopping, so the benefits will be felt much wider afield. Getting people to spend more money in the UK has to be a good idea, as it will bring more money into the UK, so it would be interesting to see what Jeremy Hunt decides next month during the budget on 6 March, as why would you want to create barriers for UK tourism and the revenue this will generate.

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