Hospitality and tourism sectors call on Chancellor to keep lower rate of VAT

Leading trade bodies in hospitality and tourism have joined forces this week to call on Chancellor Rishi Sunak to introduce a permanently lower VAT rate.

Under Treasury plans, hospitality and tourism VAT rose to 12.5% this week and will return to 20% in April 2022. 

UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping, Tourism Alliance, and the Association of Leading Visitor Attractions have warned the Chancellor that if VAT returns to 20% next year, hospitality and tourism businesses may not survive. 

A survey of the trade associations’ members found that returning VAT to 20% in April 2022 would have serious consequences; 6 in 10 businesses said it would likely lead to cutbacks and job losses, with one in ten saying it could cause their business to close. 

In a joint statement, the trade bodies 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. 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. 

The hospitality and tourism industries were hit the hardest during the global pandemic, with thousands of businesses closing down permanently and 660,000 job losses.