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Hospitality and tourism bodies call for permanently reduced rate of VAT

Leaders in the UK hospitality and tourism sectors have called on Chancellor Rishi Sunak to implement a permanent lower rate of VAT for those areas, as they have been among the hardest hit by the pandemic.

The call comes as the temporary five per cent rate of VAT covering those sectors has increased to a new rate from 1 October 2021. It is now 12.5 per cent, where it will remain until 31 March 2022, when it reverts to the standard rate of 20 per cent.

That will come just as next year’s peak season begins for much of those hospitality, tourism and leisure sectors.

Now the trade bodies – UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping, Tourism Alliance and the Association of Leading Visitor Attractions – are warning that unless VAT remains permanently low at 12.5 per cent, it could put the recovery at risk.

In a joint statement, they said: “Businesses are at a perilous stage of their recovery after what’s been a devastating 18 months. Costs are increasing and there are numerous operational challenges for them to deal with, specifically around labour and product supply”.

Reduction ‘helped business survive’

“A reduction in VAT has helped many of our businesses survive to this point and was most welcome. However, the return of VAT to its pre-pandemic level next year would curtail investment, restrict growth, set back our tourism recovery and risk yet more painful job losses.

“We’re now calling on the Chancellor to commit to introducing a permanent 12.5 per cent rate of VAT in his upcoming Budget, later this month. This will help protect jobs and continue the support for our hospitality and tourism businesses which contribute hugely to the nation’s economic and social wellbeing.”

The reduced rate of five per cent was introduced on 15 July last year. It was initially planned to end on 12 January 2021, but was extended until 31 March 2021, and then 30 September 2021, to reflect continued lockdown measures.

The temporary rate and transitionary rate apply to almost all supplies of hospitality, hotel and holiday accommodation and products, including food and non-alcoholic beverages sold for on-premises consumption and hot takeaway food and non-alcoholic beverages.

Both rates also apply to admissions to attractions that are not eligible for the cultural VAT exemption, such as theatres, circuses, fairs, amusements parks, concerts, museums, zoos, cinemas, and exhibitions.

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