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VAT extended to support tourism and hospitality sectors

Thu 4 Mar 21

Rishi Sunak has announced an extension to the current VAT rate of 5% for the hospitality and tourism sectors until the end of September and confirmed that when reduction period ends, “even then, we won’t go straight back to the 20% rate”.  He added; “We’ll have an interim rate of 12.5% for another six months; not returning to the standard rate until next year.”

Good news for the sector; the STA and UKHospitality have campaigned relentlessly for a long term cut in VAT however both organisations were quick to highlight disappointment that the extension period is likely to be too short to enable businesses to recover effectively.

Kate Nicholls, Chief Executive of UKHospitality said; ““An extension of the 5% VAT rate was absolutely crucial for hospitality businesses. Confirmation that the Government will provide support for a full year will bring peace of mind to the sector. UKHospitality has been pushing hard for this and it was critical that it was delivered today.

“While it would have been better to have extended the 5% rate further, it is now vital that the Government looks at introducing the interim rate for hospitality on a permanent basis. It would be a positive legacy of an otherwise dreadful year for our sector. A permanent reduced rate of VAT for hospitality would redress the unfair tax imbalance that our businesses have faced for too long and make us internationally competitive."

Marc Crothall, Chief Executive of the STA said: “The industry had hoped that the 5% rate would have been extended well into 2022 to allow businesses more time to recover and have the breathing space needed to meet the substantial costs of loan repayments and other significant costs which are looming on the horizon; we will continue to make the case for VAT not returning to 20% beyond March next year to stay competitive as a destination.”

You can view the Chancellor’s budget statement in full here.

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