Kemi Badenoch has committed to restoring the Badenoch VAT refund scheme for international tourists, reversing a decision taken by the previous Conservative government in 2021 that she says left the UK less competitive than rival European destinations. The pledge would reinstate tax-free shopping for visitors and, subject to evidence, could be extended to cover EU tourists as well, with a full rollout planned by the end of the next Parliament.
VAT (Value Added Tax) is a consumption tax added to goods sold in the UK. Under the scheme that ran until 2021, international visitors could reclaim that tax on items purchased and taken home, making the UK a more attractive shopping destination compared with countries that still offer the refund.
Why retailers are backing the Badenoch VAT refund scheme
The announcement has drawn broad support from business leaders across retail, hospitality and tourism. In a joint statement, the bosses of Fortnum & Mason, Paul Smith and the parent company of Claridge’s hotel described the move as “pro-growth” and “pro-jobs”.
The full list of signatories includes chef and TV personality Angela Hartnett; Charlie Gilkes, co-founder of Inception hospitality group; Clare Hornby, chief executive of Me+Em; Burlington Arcade managing director Jamie Reuben; Marc Socker, chief executive of Maybourne, which owns and manages The Berkeley, Claridge’s, The Connaught and The Emory hotels; Ewan Venters, Paul Smith executive chairman; Simon Emeny, Fuller, Smith and Turner executive chairman; and Tom Athron, Fortnum & Mason chief executive.
In their joint statement, the group said: “With its heritage and the quality of our products and service, Britain is well placed to compete with the world’s finest destinations. The restoration of tax-free shopping for tourists will allow us to win back those who may have taken their custom elsewhere in recent years. When taking the full economic benefits and other taxes paid into account, we believe this will be a net benefit to Britain.”
The spending gap that has prompted the policy push
Visitor numbers to the UK have returned to near pre-Covid levels, but real-terms spending by international tourists remains 8% lower than before the pandemic, according to estimates from VisitBritain based on data from 2024. The Conservatives argue that the scrapping of the VAT refund scheme in 2021 contributed directly to that shortfall, with holidaymakers choosing rival European cities where their purchases stretch further.
Badenoch, who held a Treasury ministerial role at the time the scheme was abolished, said retailers were being “let down by a policy that is driving their customers away.” She added: “Britain should be the place where the whole world comes to shop. We have iconic retailers, inventive designers and brilliant manufacturers, but they are being let down by a tax policy that is chasing their customers away. British retailers are closing down shops with the knock-on effects damaging small manufacturers, suppliers and jobs across the UK.”
To help offset the cost, the party is proposing a “crackdown” on so-called “health tourism”, which would involve more consistent charging of patients who are not eligible for free NHS treatment.
Labour and the Treasury push back
Labour wasted little time in pointing to the contradiction at the heart of the pledge. A party spokesperson said: “Kemi Badenoch used to say tax-free shopping was a costly giveaway and now she’s trying to sell it as an economic miracle. If they really think it’s such a great idea, they should explain why they scrapped it in the first place and how they’d pay for bringing it back.”
A Treasury spokesperson struck a different note, saying the UK remained “one of the most-visited countries in the world” and that the government was working towards welcoming 50 million international visitors a year by 2030. The spokesperson also noted that visitors can already claim VAT relief where purchased items are shipped directly to their home country as exports. That existing route, however, applies only to goods sent abroad rather than carried home by the shopper, which is the gap the Conservative proposal aims to close.
