Under treasury plans, hospitality and tourism VAT is expected to rise to 12.5% from today (1 October) and will return to its pre-pandemic level of 20% come April 2022.
The trade bodies are now warning that unless VAT remains “permanently low” at 12.5%, the government “risks derailing the recovery” of businesses.
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.”
They added: “We’re now calling on the chancellor to commit to introducing a permanent 12.5% 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.”