The VAT Retail Export Scheme

The VAT Retail Export Scheme was withdrawn in Great Britain with effect from 1 January 2021, and the airside tax-free shopping concession (ESC 9.1) went with it. A shop in England, Scotland or Wales cannot refund VAT to an overseas visitor who carries goods home. The scheme continues to operate only in Northern Ireland. If you have been told otherwise, the source is out of date.

That is the whole answer, and it is worth stating before anything else because almost everybody arriving at this question is working from pre-2021 information. Travel guides, shop signage, airline magazines and a great deal of second-hand advice still describe tax-free shopping in London as though it were a live thing. It is not, and a retailer who acts on that belief and hands back VAT at the counter will be assessed for the VAT they failed to account for, with interest.

What was withdrawn, and when

Two separate reliefs ended on the same day, 1 January 2021, at the end of the transition period.

The first was the VAT Retail Export Scheme itself, usually shortened to VAT RES. Under it, a VAT-registered retailer could sell goods to an overseas visitor, issue a refund document, and, once the visitor had exported the goods personally and the document had been certified on departure, relieve the VAT. The customer got the VAT back, either directly from the retailer or through a refund company, and the retailer adjusted its output tax.

The second was the airside tax-free shopping concession, known as ESC 9.1. That was the arrangement under which certain goods sold in departure lounges beyond security could be sold without VAT to passengers travelling outside the country. It was a concession rather than a statutory relief, and it was withdrawn at the same time.

HMRC set both changes out in Revenue and Customs Brief 21 (2020), which is the document to cite if anybody disputes the position. The withdrawal applies to Great Britain, which for these purposes means England, Scotland and Wales. Northern Ireland is dealt with separately below, and that separation is the single most important structural point on this page.

What a Great Britain retailer does now

You charge VAT in the normal way.

A sale over the counter in a Great Britain shop is a domestic supply. The liability is determined by what the goods are, not by who is buying them or where they are going afterwards. A standard-rated item sold to a visitor from Tokyo carries VAT at 20% exactly as it would if sold to somebody who lives around the corner. There is no form to issue, no refund to process and no adjustment to make on the return.

Three practical consequences follow, and they are the ones that come up in real shops.

• You do not need to ask where the customer is from. The question no longer changes any VAT answer on a counter sale, so collecting passport details for VAT purposes serves no function.
• You should not be holding VAT RES stationery. If refund forms from a refund operator are still in the drawer under the till, they relate to a scheme you cannot operate and somebody will eventually fill one in.
• Your shop-floor signage may be lying. "Tax-free shopping available" stickers survived the withdrawal in a lot of high street windows. They create an expectation you cannot meet and an argument at the counter.

None of this affects your input tax. Your ordinary recovery on stock, rent and overheads is unchanged, because you are making taxable supplies at the standard rate in the ordinary way. What has gone is a relief for the customer, not a restriction on you.

Where VAT can still be relieved, and where it cannot

The withdrawal did not remove every route to a VAT-free sale to somebody who lives abroad. It removed one specific route, the one that depended on the customer carrying the goods out themselves. The table below puts the two sides next to each other.

VAT charged in full, no visitor refund	VAT relief still available
A Bond Street jeweller sells a watch to a visitor from Singapore, who carries it home in their luggage. VAT at 20% is due and stays due.	The same jeweller ships that watch direct to the customer's address overseas. That is an export by the retailer, dealt with under the ordinary export rules.
An Edinburgh department store sells a coat to a tourist. Scotland is part of Great Britain, so there is no refund route.	A Belfast department store sells the same coat to a qualifying overseas visitor under the surviving Northern Ireland scheme.
An airside shop at a Great Britain airport sells sunglasses after security. ESC 9.1 was withdrawn, so the price is a VAT-inclusive price.	A duty-free sale of excise goods is governed by its own excise regime, which is a different tax and not this scheme.
A Manchester electronics retailer sells a camera to a visiting student. Standard-rated goods, standard-rated sale, no refund.	A children's clothing retailer sells zero-rated garments to the same student. No VAT arose in the first place, so nothing needs relieving.

The deciding question is not who the customer is, it is whether the retailer or the customer takes the goods out of the country. In Great Britain, a customer carrying goods home in their own luggage no longer triggers any relief at all, however far they are travelling and however much they have spent.

Goods you export yourself

If your reason for asking about the VAT Retail Export Scheme is that you want to sell to overseas customers without the VAT sitting on the price, the realistic route in Great Britain is to arrange the export yourself.

This is a genuinely different mechanism, not a rebadged version of the withdrawn scheme. Goods that the retailer exports follow the ordinary export rules, and those rules carry their own conditions, their own evidence requirements and their own time limits. They are not conditions you can infer from how VAT RES used to work, and the evidence they require is documentary evidence of the goods leaving, held by you, not a certified form carried by a customer.

The practical shape of it: the customer buys in the shop or online, you arrange the shipment to an address outside the country, and you hold the commercial and transport evidence that the goods went. Read HMRC's guidance on VAT on goods exported from the UK before you price anything on this basis, because the relief depends on the evidence and the relief is lost if the evidence is not there. Our page on VAT on cross-border goods covers the surrounding mechanics of moving goods in and out.

The reason this route works when the counter sale does not is straightforward. Zero-rating an export preserves your input tax recovery, in the way any zero-rated supply does, which is covered on our page on zero-rated VAT. You are not giving anything up by exporting properly. You are simply doing it in the one way the rules still recognise.

Northern Ireland: the scheme that survives

In Northern Ireland the VAT Retail Export Scheme continues to operate. A VAT-registered retailer in Northern Ireland may zero-rate goods sold to qualifying overseas visitors for personal export, under VAT Notice 704 and HMRC's Retail Export Scheme (Northern Ireland) guidance.

We are deliberately not restating the scheme's conditions here. Who counts as a qualifying overseas visitor, what purchase requirements apply, how long the visitor has to take the goods out, how the refund reaches them and what a refund operator may charge are all matters where a retailer needs the live text rather than somebody's summary of it. Work from HMRC's Retail Export Scheme (Northern Ireland) guidance and from Notice 704 directly.

One operational point is worth flagging because it catches people who ran the scheme before 2021. For Northern Ireland sales made on or after 1 January 2021, the VAT RES form will not be stamped by Border Force in Great Britain. It has to be presented on leaving Northern Ireland or the EU. A Belfast retailer whose customer is flying home via Heathrow needs to know that, because the customer will otherwise arrive at a Great Britain airport expecting a certification that will not happen there. Check the current process in the gov.uk guidance before you brief your staff on it.

This is not a Notice 727 retail scheme

The names are close enough to cause real confusion, so it is worth one paragraph.

A retail scheme in the VAT Notice 727 sense is a method of working out how much output VAT is inside your gross takings when you cannot issue a VAT invoice for every sale. Point of sale, apportionment and direct calculation are the standard methods, they carry tax-exclusive turnover limits, and they are entirely about your own VAT accounting. The VAT Retail Export Scheme was a visitor refund scheme. It never had anything to do with how you computed your takings. If what you actually need is the first of those, our page on retail VAT schemes works all three methods over one shop's quarter.

Worked example: a Great Britain gift shop

A gift shop in Bath sells a hand-thrown ceramic piece for £600 including VAT to a visitor from outside the UK who is flying home the following day.

• The goods are standard-rated, so the VAT fraction of one sixth applies.
• VAT inside the price: £600 divided by 6, which is £100.
• Net selling price: £500.
• Output VAT the shop declares on its return: £100.
• Amount refundable to the visitor: nil.

As history, and labelled as history: before 2021 the same shop could have issued a VAT RES refund document, the visitor could have had it certified on leaving, and the £100 could have come back to them less the refund operator's charge. That route closed on 1 January 2021 and the £100 now stays with HMRC.

The shop's alternative, if it wants the sale on a VAT-free basis, is to ship the piece to the customer's home address and treat it as an export on the ordinary export rules, holding the evidence that the goods left. Same customer, same goods, different mechanism, and the mechanism is the thing that decides the answer.

Worked example: the same sale in Northern Ireland

A gift shop in Belfast sells the identical £600 piece to the same visitor.

Here the retailer can operate the surviving Northern Ireland scheme. Subject to the scheme's conditions being met and the form being presented on leaving Northern Ireland or the EU, the sale can be zero-rated for personal export, so the £100 of VAT does not stick to the customer. The retailer still recovers its input tax in the ordinary way, because zero-rating is a taxable supply at 0% rather than an exemption.

Same goods, same customer, same price, different jurisdiction, different answer. That is the whole shape of the post-2021 position in one comparison, and it is why the Great Britain and Northern Ireland questions cannot be answered together.

Online orders from overseas customers

A lot of the traffic that used to arrive through the visitor refund scheme now arrives through a website, and the VAT question changes shape when it does.

If a customer abroad orders from your online shop and you arrange the delivery to an address outside the country, you are the exporter and the ordinary export rules are in play, with their conditions and their evidence. If the customer orders online, pays online and then collects in store before flying home, you are back to a domestic supply with VAT on it, because nobody has exported anything. The delivery arrangement, not the payment method and not the customer's address on the order, is what moves the sale from one category to the other.

That distinction is worth building into the checkout rather than resolving case by case at the counter. A click-and-collect option and a ship-overseas option are different VAT outcomes on identical goods, and a shop that treats them as the same thing will either overcharge one set of customers or under-declare on the other. Where a third party such as an online marketplace is involved, the responsibility for the VAT can sit somewhere else again, which is another reason to settle the routing before volume arrives.

What an inspection actually looks at

Because the Great Britain position is now a single answer, the things an officer can usefully test are narrow, and they are worth knowing.

• Any sale recorded at zero or at a reduced rate where the goods are standard-rated. A pattern of these against foreign customer names is the obvious flag, and it is easy to spot in till data.
• Credit notes and refunds that look like VAT-only adjustments. Refunding "the VAT element" to a departing customer is the same error wearing a different label.
• Zero-rated exports with no export evidence behind them. Where you do ship overseas, the file has to show the goods left. An invoice addressed abroad is not evidence that anything moved.
• Northern Ireland scheme paperwork held by a Great Britain business. There is no legitimate reason for it to be there.

Keeping the sales ledger clean on this point is cheap. Fixing it after an assessment is not, because the VAT you did not charge comes out of your margin rather than out of a customer who has long since gone home.

Is it coming back?

The question gets asked often enough to deserve a plain answer: there is no scheme to plan around today. Trade bodies in retail, tourism and aviation have pressed for a replacement since the withdrawal, and the subject reappears at most fiscal events, but a campaign is not a relief. Until something is announced and legislated, a Great Britain retailer prices and accounts on the basis that a counter sale to a visitor carries VAT in full. Anyone selling you a system, a service or a signage package on the basis that tax-free shopping is available in Great Britain is selling you something that does not exist.

What people get wrong

These are the errors that actually cost money, in the order we see them.

• Believing tax-free shopping still exists in Great Britain. It does not. The belief is widespread because travel guidance, refund-operator branding and shop signage all lag the change by years. A retailer who refunds VAT on this basis has under-declared output tax and will be assessed for it.
• Confusing the VAT Retail Export Scheme with the Notice 727 retail schemes. Different subjects, similar names. Asking your accountant about "the retail scheme" can get you an answer to the wrong question.
• Assuming the Northern Ireland scheme can be operated from a Great Britain shop. It cannot. The surviving scheme is a Northern Ireland scheme and a Cardiff or Glasgow retailer has no route into it.
• Assuming airside purchases at a Great Britain airport carry VAT relief. ESC 9.1 went with the scheme. A departure-lounge price is an ordinary VAT-inclusive price unless the goods are zero-rated in their own right.
• Confusing VAT relief with duty free. Duty free is an excise matter with its own rules and allowances on gov.uk, and it is a different tax from VAT.
• Zero-rating a counter sale because the customer showed a foreign passport. Residence has never been the test for a domestic over-the-counter supply, and since 2021 there is nothing it can unlock.
• Treating an export as done without the evidence. Where the retailer does ship overseas, the relief depends on holding evidence of export within the time the rules allow. A shipment you cannot prove is a standard-rated sale.

What to do next

If you run a Great Britain shop that serves overseas visitors, the useful work is not in the VAT rules, because they now give one answer. It is in deciding whether shipping goods for customers is a line of business worth setting up, and if so, building the evidence trail before the first order rather than after the first inspection. If you run a Northern Ireland shop, the useful work is in reading the current scheme guidance end to end, because the conditions are the whole of it.

Registration sits behind all of this: you are only charging or relieving VAT at all if you are registered, and the VAT registration threshold is £90,000 of taxable turnover in a rolling twelve months. Retailers looking at the wider VAT picture for a shop will find it on our page for accountants for retail shops.

If you want a second look at how your shop is treating sales to overseas customers, or at whether a retailer-shipped export route is worth building, get in touch.