SCOTLAND’S capital faces a £90 million hit and could lose more than 1800 jobs as the UK Government axes tax-free shopping for overseas visitors, it’s claimed.

The Westminster Government announced the end of the VAT Retail Export Scheme (Vat Res) last week.

It allows travellers from overseas to reclaim the VAT paid on goods purchased, but not consumed here, but will be abolished in January.

The change will make the UK the only European state without tax-free shopping for visitors from outwith the EU.

Firms including Marks & Spencer, Heathrow and Selfridges have already written to Chancellor Rishi Sunak saying this will put 70,000 UK jobs at risk.

But the Treasury says the scheme costs too much and is susceptible to fraud.

Now the newly-formed Association of International Retail (AIR) says that will cost Scotland’s capital up to £92m, putting 1840 jobs in jeopardy.

Paul Barnes, chief executive of AIR said: “The Government’s decision to eradicate tax free shopping in the UK will impact Britain’s reputation and appeal as a global shopping destination, providing further damage to our struggling economy.

“Outside of London, Edinburgh is a key tourist attraction for visitors, proven in the growing number of international flights to Edinburgh airport. The removal of tax free shopping will not only impact the cities retail sector but be a huge blow for hotels and restaurants who are reliant on international visitors.”

Edinburgh Airport is the sixth busiest in the UK and serves more than 150 destinations around the world. Of the £22 billion spent by international visitors in the UK last year, almost 20% of purchases outside London were made in Edinburgh. Chinese travellers are the city’s biggest overseas spenders, according to Switzerland-based tax free shopping expert Global Blue, with an average transaction value of more than £820.

American citizens make up 6% of the market, while Indonesians and those from the United Arab Emirates represent 2% each.

George McNeil, managing director retail at upmarket knitwear firm Johnstons of Elgin, commented: “Johnstons of Elgin are surprised at this quick announcement to end tax-free shopping throughout the UK.

“This is a decision that will come with significant risk to the Johnstons of Elgin retail footprint. At present, 33% of all retail sales comes from tourists spending their money on the understanding that they will receive back their tax.

“As we continue to fight to recover from the ongoing effects of Covid-19, we could do without further burdens being placed upon our success. We would encourage a more progressive approach, such as France, where we see a reduction in the tax free threshold being introduced, to encourage further tourism spend.”

The Treasury says it consulted on the change, which will be “in line with international norms”.