Over 250 hospitality leaders call for VAT to be held at 12.5%

More than 250 business leaders from hospitality and leisure have written to the chancellor, Rishi Sunak, urging the Government to keep VAT at 12.5% beyond March 2022, according to UKHospitality.

It revealed the letter calls on the Treasury to maintain the current level to enable many “fragile” businesses to continue their recovery, to protect jobs, and to help stave off higher inflation in the economy.

The current rate of 12.5% is set to rise to 20% in April unless the chancellor intervenes. The month will bring what has been described as a “cliff edge” for the hospitality industry, according to UKH, with a rise in VAT set to happen alongside a rise in the national minimum wage.

A joint study by UKHospitality, the Tourism Alliance, the British Beer and Pub Association, and the Association of Leading Visitor Attractions found that a permanent rate of 12.5% would bring VAT on hospitality and attractions in line with the European average (at 20% it is nearly double) and set off a virtuous cycle of industry investment and growth, helping ‘level up’ UK regions.

The letter highlights the success of the lower rate of VAT applied for tourism and hospitality (on food, accommodation and non-alcohol drinks) in enabling businesses to survive, protect jobs and to continue their recovery, despite “the ravages of the pandemic.”

It also says the policy has been “paramount” in helping businesses to keep as low as possible their prices to customers, in the face of significant cost pressure in the sector, including the cost of energy, transportation, wages and food and drink.

Some of the signatories include business leaders from: Apex Hotels, BaxterStory, Bourne Leisure, Big Table Group, Caffe Nero, Center Parcs, Côte, Fuller’s, Greene King, Hilton, IHG Hotels and Resorts, JD Wetherspoon, Loungers, Marston’s, Mitchells & Butlers, Moto Hospitality, Nobu, Parkdean Resorts, Pho, Pizza Express, Pizza Hut, plus many more.

According to UKH, a “major” concern of the impact of the VAT rise is that businesses will have no choice but to “significantly” raise their prices, putting pressure on the cost of hospitality experiences and also further fuelling inflation across the economy.

Kate Nicholls, CEO of UKHospitality, said: “This is about so much more than an extension to temporary measures in the face of the challenges brought by Covid; it’s about working to establish the right tax level for our world-class hospitality and tourism industries.

“It is vital, in the interests of competitiveness, job creation, growth and ensuring hospitality and tourism play their full part in driving the economic recovery.”