Don’t scrap the VAT Retail Export Scheme

The call is part of an open letter to the UK government organised by industry group Fashion Roundtable. The letter, signed by a number of leading fashion industry figures, highlights “the key issues, impacts and unforeseen consequences of Brexit” for the UK fashion industry. 

Under the VAT Retail Export Scheme, international visitors to the UK had been able to claim a VAT refund from VAT-registered local retailers. 

Supporters of the scheme say that it helped support small and medium-sized retailers as well as high-end department stores. Lobby groups say ending VAT-free shopping also imperils retails and tourism jobs.

The fashion industry group is calling for a host of measures to support the UK fashion industry, including additional financial support for fashion and textile SMEs and action on extending work visas to garment workers.

Export woes

Brexit doesn’t just affect fashion sales within the UK.

Retailers selling to customers in Europe now face the prospect of additional VAT, duties and handling fees. These additional costs obviously affect competitiveness and profit margins.

While the UK-EU trade deal makes provision for tariff-free trade, exporters need to comply with Rule of Origin regulations to take advantage of the benefit. Fashion retailers that import goods to sell to customers in Europe will thus face the prospect of added tariffs. 

Manufacturers that used imported raw components to produce finished goods for export should seek expert advice on their RoO status. 

Crunched consumers

UK-based shoppers who purchase fashion online have also felt the bite of additional VAT and customs charges.  

Numerous reports are emerging of British consumers making online purchases of clothing, textiles and other items shipped from Europe being hit with unexpected VAT and customs charges. 

In cases where items are purchased via an Online Marketplace, the OMP itself is tasked with charging and collecting the relevant VAT. However, consumers who have made a direct purchase have often been surprised by surcharges. 

To avoid delays and dissatisfaction, Ecommerce retailers will benefit from expert guidance on measures to ensure goods are transported between the EU and UK on time, with full price transparency, and in compliance with all regulations.

Tailor a Brexit solution for your business

VAT IT’s Brexit solution is a holistic service that tackles all logistics, customs, VAT compliance processes, and refund mechanisms. 

With 20 years of experience managing the regulatory and logistical challenges of shipping goods between the UK and Europe, re:TRADE will ensure your business has full clarity on costs, help you avoid disruptions to your supply chain and secure the most competitive shipping rates.