9 Min. Read
October 28, 2020
When you shop in the UK, you pay value added tax (VAT) on most of the goods and services you buy. Usually, it’s already incorporated into the price, so you don’t have to do any of the maths. Which is good news, as there are three rates of VAT, and you’d need to know whether to apply the 0%, 5% or 20% rate. Thankfully, this is all done for you by retailers and you’re charged a price that’s inclusive of the correct VAT.
If you are visiting Britain, you can sometimes reclaim this VAT cost before you leave.
You do this through HMRC’s Retail Export Scheme, also known as tax-free shopping. It only applies to goods you buy in the UK to take home to another country. Unfortunately, it doesn’t apply to services.
You organise VAT refunds with a participating retailer. Shops don’t have to be part of the scheme. If they are, they usually have ‘tax-free shopping’ signs. Expect to pay a fee to whoever processes your VAT refund, to cover administration costs.
Important to note that you can only claim a VAT refund on goods that have been bought in the last three months.
Here’s What We’ll Cover:
Who Is Eligible to Claim a VAT Refund?
What Goods Aren’t Allowable for VAT Refunds?
How Does the VAT Retail Export Scheme Work?
What Do I Do When I Get to Customs?
How Do I Claim VAT Back at an Airport in the UK?
How Much Tax Refund Will I Get If I Leave the UK?
Who Is Eligible to Claim a VAT Refund?
You are eligible for the VAT Retail Export Scheme as a visitor or a UK or European Union (EU) resident, as long as you meet the following criteria.
Overseas Visitors
You’re visiting the UK from overseas and you’re returning to your home, which is outside the UK or EU. And you’re going to take these goods out of the UK or EU by “the last day of the 3rd month, after the month you bought them in.” For example, if you buy an item on 2nd April, you must ‘export it’—take it out of the UK or EU—by 31st July.
Overseas Residents
If you’re working or studying in the UK as an overseas resident, you can use the scheme if you’re leaving the EU or Great Britain for a minimum of 12 months. This also applies if you’re an EU resident. You must take the goods out of the country within the same time frame as overseas visitors.
If you’re in one of these categories, that’s great news for your bank balance as you’re able to claim a VAT refund. But you will need to prove your eligibility, both to the shop assistants who organise the return of VAT, and to customs officers as you depart Britain or the EU. Acceptable evidence is your passport, visa, any other relevant travel documentation, your VAT 407 form and receipts for the items in your VAT refund claim. Without this proof, your claim won’t be approved.
What Goods Aren’t Allowable for VAT Refunds?
OK, bad news out of the way first. You can claim a VAT refund on most things you buy in the United Kingdom, except for these items:
- Consumable goods that you’ve started using, or completely used in the UK, before you leave. This includes things like food, alcohol and perfume. You might still have some of those delicious handmade chocolates left to take home with you, but you’ve happily munched your way through the top layer.
- Services like hotel bills, spa treatments and car hire.
- Any goods bought online or any other mail order service.
- Boats and motor vehicles.
- Un-mounted gemstones
- Bullion over 125grammes, 10 tolas or 2.75 troy ounces.
- Goods that you’re exporting as freight. Anything you’re exporting through the retail export scheme must travel with you on the same plan, in your hand luggage or in the hold.
- Anything that needs an export licence, except for antiques.
- Any goods worth over £600 that you’re exporting for business purposes.
For most of us, this still leaves plenty of options for your tax-free shopping list.
Information On How The VAT Retail Export Scheme Works
It’s important to understand the requirements of the VAT retail export scheme before you set off for some retail therapy. If you intend to reclaim the VAT, you need to follow certain rules while you’re actually shopping. This means you’ll be prepared for the checks as you leave the UK, or EU that confirm your claim.
Time for a Tax-free Shopping Spree!
It’s great having actual objects from the different places we’ve lived, worked and visited. They spark our treasured memories, or make unusual gifts. And, as you prepare to leave the United Kingdom or EU, you may decide to buy something extra special to take home with you.
Just following these few simple rules means that you can claim money back on these items by ensuring you meet the criteria for a VAT refund at your point of departure. Frankly, who doesn’t love the idea of tax-free shopping?
What Are the Tax-free Shopping Rules?
You must find shops that have a tax-free shopping sign. After you’ve had a browse, talk to the shop assistant about using the retail export scheme. You’ll need to show them your national ID card or passport, so they can see you’re eligible for the scheme.
Unfortunately, you must be there yourself to fill in the paperwork—you can’t send someone else with your documents. Although anyone else can pay for your items, you have to be there to fulfill the VAT refund element of the purchases.
The shop assistant will go through the VAT 407 form and the scheme’s other rules with you. There are sections on the form for you—the customer—and the shop assistant to complete. You must both complete and sign the relevant parts of the form in each other’s presence. You can’t just fill in your bit and then leave the shop assistant to write their part once you’ve gone. The only situation in which it’s acceptable for someone else to sign your form is if there are reasons directly relating to a disability. No proxy signatures are allowed.
The shop assistant will give you the completed form, receipts for your goods and sometimes a pre-paid envelope to take with you at the end of your transaction. You must have all this paperwork to show at UK or EU customs. There, a customs officer will stamp your form and you then send it back in the envelope you’ve been given. If you only have receipts for your goods, you won’t get a refund.
After your discussion with the shop assistant, you will be clear on:
- How you will receive your VAT refund
- How much the shop is charging to process your VAT refund
- When you’ll get your VAT refund money
Keep asking questions about the VAT retail export scheme until you’re certain of these details.
What Do I Do When I Get to Customs?
You must get your VAT refund 407 form checked and stamped by a UK or EU customs officer. This can’t be done at the other end of your journey. The specific rules are dependent on your final destination after you leave the UK (or EU).
Final Destination: Another Country in the EU
If you’re leaving the UK for another EU country, you need to show your VAT refund paperwork and goods to the customs officers in the final EU country you visit.
Final Destination: A Country Outside the EU
If you’re leaving the EU altogether, show your receipts, VAT refund form (you completed with the retailers) and goods at UK customs. If you’ve packed any of these goods ready to go in the hold, be aware that you’ll need to show them to customs officers before you check in your bags.
Final Destination: A Country Outside the EU With Flight Changes Inside the EU
As you leave the UK, you need to show UK customs officers any goods that are in your hold baggage and the relevant paperwork. Any VAT refund goods in your hand luggage will be checked by the customs officers in the last EU country you fly out of, for your final destination outside the EU.
Wherever you’re going, all you really have to do is make sure that your goods are easily accessible and your paperwork is in order.
How Do I Claim VAT Back at an Airport in the UK?
After your VAT claim is officially stamped, you’ll get your refund in the way you agreed to with the shop assistant at the time of purchase. Some commercial refund companies with booths at airports will give you a cash refund before you board your flight. This usually incurs another fee. This can be done in sterling, another currency of your choosing or put on your credit card if you have a global refund form.
Alternatively, you can post your stamped form to the shop or commercial refund company. Some airports, like Heathrow, have a customs post box for your form and the officers will check and post it for you—as long as everything checks out.
How Much Tax Refund Will I Get If I Leave the UK?
You’re going to have to put in a bit of time and effort to use the VAT refund scheme. So you want to know if you’re looking at getting back pennies or pounds. Totally understandable. And, rather unsurprisingly, the answer is ‘it depends.’
You will get a VAT refund for all the VAT you paid on your goods, minus any handling fee charged by the retailer. The more you’ve spent, the more you’ll get back in your refund. But it also depends on the VAT rate applied to those goods. The UK has three rates of VAT that apply to goods and services: 20%, 5% and 0%. Most items you are likely to buy fall into the 20% standard rate category. You can find out more information about UK VAT rates in our ‘How Does VAT Work in the UK?’ guide.
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