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<p>Ahead of the end of the transition period, the Government has announced the VAT
and excise duty treatment of goods purchased by individuals for personal use and carried
in their luggage arriving from or going overseas (passengers). The following rules
will apply from 1 January 2021:</p><p>- Passengers travelling from Great Britain to
any destination outside the United Kingdom (UK) will be able to purchase duty-free
excise goods once they have passed security controls at ports, airports, and international
rail stations.</p><p>- Personal allowances will apply to passengers entering Great
Britain from a destination outside of the UK, with alcohol allowances significantly
increased.</p><p>- The VAT Retail Export Scheme (RES) in Great Britain will not be
extended to EU residents and will be withdrawn for all passengers.</p><p>- The concessionary
treatment on tax-free sales for non-excise goods will be removed across the UK.</p><p>
</p><p>The Government published a consultation which ran from 11 March to 20 May.
During this time the Government held a number of virtual meetings with stakeholders
to hear their views and received 73 responses to the consultation. The Government
is also continuing to meet and discuss the changes with stakeholders following the
announcement of these policies.</p><p> </p><p>The detailed rationale for these changes
are included in the written ministerial statement and summary of responses to the
recent consultation: <a href="https://questions-statements.parliament.uk/written-statements/detail/2020-09-11/hcws448"
target="_blank">https://questions-statements.parliament.uk/written-statements/detail/2020-09-11/hcws448</a>
and <a href="https://www.gov.uk/government/consultations/a-consultation-on-duty-free-and-tax-free-goods-carried-by-passengers"
target="_blank">https://www.gov.uk/government/consultations/a-consultation-on-duty-free-and-tax-free-goods-carried-by-passengers</a>.
A technical note has also been issued to stakeholders to expand on this document and
to respond to issues raised by stakeholders.</p><p> </p><p>On 25 November the independent
Office for Budget Responsibility (OBR) set out their assessment of the fiscal impact
of the withdrawal of the VAT RES. Factoring in a higher-than-usual elasticity of 1.9
to account for spending on luxury goods, the OBR estimate that the withdrawal of the
VAT RES will result in a significant direct Exchequer saving of around £400 million
per year, once passenger numbers recover from the impacts of COVID-19. Based on the
1.2 million users of the scheme who received a refund in 2019, this includes an assumption
that approximately 20,000 – 30,000 fewer tourists visit Great Britain a year. That
is 0.07% of the 40 million visitors to the UK in 2019.</p><p> </p><p>The OBR also
looked at this package in the round when assessing the indirect impact on the economy
– including the effects of extending duty-free sales – alongside the substantial support
provided to the economy and retail industry.</p>
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