VAT for the UK hospitality and tourism sectors should stay at a lower rate of 12.5% beyond March, according to an inquiry by a group of influential MPs
The All Party Parliamentary Group (APPG) for Hospitality and Tourism, concluded that VAT should not return to 20% this April.
MPs cited trade body UKHospitality data revealing that the lower rate would bring benefits including jobs, international competitiveness and social wellbeing.
The rate rose to 12.5% following a temporary cut to 5% in July 2020 to help businesses struggling in the pandemic.
The Treasury plans to return the tax to the pre-pandemic level of 20% next month.
But a UKHospitality member survey cited as part of the inquiry showed that nine in ten businesses believed retention of 12.5% VAT was crucial to their recovery.
Other figures published in the report show that all but one region of the UK employs more than 650,000 people in hospitality and receives over £3.5 billion in tourism expenditure from visitors, with domestic tourism redistributing £25 billion a year from urban to rural and seaside economies – “the largest form of non-governmental redistribution of wealth in the UK” – making hospitality and tourism “key economic drivers in every region of the country”.
The inquiry report said in its conclusion: “The evidence submitted to the APPG…strongly supports the case for retaining the current 12.5% rate of VAT to support the industry in playing a key role in the UK’s economic recovery and the government’s wider agenda, such as Net Zero and levelling-up.”
East Devon MP Simon Jupp, chair of the Hospitality and Tourism APPG, said in the report: “Having sought views across the industry, it’s clear that keeping the reduced rate of VAT will help the hospitality and tourism industry get back on its feet after an exceptionally difficult two years.
“It’s really important to support the industry to help showcase the best of the UK”.
Kate Nicholls, chief executive of UKHospitality, which provides secretariat services to the Hospitality and Tourism APPG, said: “The hospitality and tourism industry has been the hardest hit by the Covid-19 pandemic. However, with the right support, it can play a crucial role in the country’s economic recovery and help rebuild people’s wellbeing after they have had to live under social restrictions for the past two years.
“Hospitality and tourism is a major economic sector, because its businesses are community hubs that bring everyone together, across the entire nation. This will remain true as we learn to live with Covid.
“However, for businesses to provide the best possible service, they need to return to financial strength.
“We welcome this report from the APPG on Hospitality and Tourism, which highlights the importance of keeping VAT at 12.5% to achieve this.”