A note for non-European tourists to the United Kingdom in respect of Value Added Tax and obtaining refunds.
If you’re planning to go shopping whilst in the UK, it’s important to know that we have Value Added Tax (“VAT”) which is a 20% tax added into most goods and services. You will see the price including VAT. Unlike in the US, you don’t have to do calculations in your head to account for sales tax – the price you see is what comes up at the till!
Eating in vs Eating out.
At cafes and restaurants, including places like Starbucks, you will be asked if you are “eating in, or taking away.” This is because a croissant is (for example) £1.50 to take away, but £1.80 (ie, £1.50 + 20%) to eat in, as eating in the cafe is technically a “service” that the cafe is supplying to you. Sometimes VAT is shown on a separate line. This doesn’t mean you’re paying extra – it just shows how much tax is included in the price.
It should be noted that nobody really cares about this at cafes – I often say “take away” and then go find a seat within the cafe anyway. It’s really not a big deal at all, but I thought I’d flag it in case you were wondering why they ask or why there is a different price stated on the menu. The cafe then pays this VAT to the government – they don’t keep the 20% – it all goes back into the treasury. Of course, if you’re sat at a restaurant and a waiter comes to take your order, don’t expect to get away with saying you’re not eating there 😉
You may notice at the airport when you land a kiosk for VAT refunds. This is because if you visit the UK but live outside of the EU, you can obtain a refund on some of the aforementioned VAT! You cannot receive a refund on things that you have already consumed within the UK – like food you’ve already eaten or perfume you wore. However, you might be able to get it on gifts and clothing, bottles of gin, boxes of chocolate, jewellery, etc.
How to get the refund? Save your receipts and ask the retailer for a VAT 407 form. You may be asked to show proof you don’t live in the UK, like a US Passport or drivers’ licence. When you go to the airport to leave the UK, show your purchased goods, the completed form and your receipts to customs. Customs will approve your form if everything is in order. You then take the approved form to get paid.
I should note that many, many items are NOT charged VAT (children’s clothes, books, antiques, admission to museums, and a bunch of other items listed here) are NOT charged VAT. But it never hurts to ask.
Heathrow Airport has a helpful VAT refund brochure, which you can read here.