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Over 200 hospitality bosses join call to keep VAT at 12.5%

Published:  25 October, 2021

Over 200 hospitality CEOs have signed a letter urging the Chancellor Rishi Sunak to permanently keep VAT at 12.5%.

Chief executives of the UK’s pubs, bars, restaurants, cafés, hotels, leisure parks, nightclubs, entertainment venues, and visitor attractions have signed the letter ahead of the Budget on Wednesday (27 October).

Companies on the list of 200 include Hilton, Marriott International, Fuller, Smith & Turner, Revolution Bars, Rekom UK, Stonegate Group, Glendola Leisure Group, Bourne Leisure, Mitchells & Butlers, Claridge’s and Oakman Group.

While the Government supported businesses during the Covid-19 pandemic by dropping VAT to 5%, under current plans VAT will return to its pre-pandemic level of 20% in April 2022.

The industry leaders have called for a permanent reduced rate of VAT for hospitality and tourism, to support them to rebuild businesses and play a full part in the nation’s recovery – alongside meaningful support on business rates.

This letter follows calls by a coalition of the country’s hospitality, tourism trade and membership bodies, led by trade association UKHospitality (UKH), that has called on the Prime Minister to keep VAT at 12.5% for businesses to help them play their part in the Government’s levelling-up and job creation agenda.

This new letter highlights the benefits of a permanent 12.5% rate of VAT for the industry, including putting a halt to price rises for hard-working families, enabling the industry to generate new jobs, supporting higher wages and better training, unlocking capital to deliver a greener future and allowing businesses in the sector to remain globally competitive.

UKH chief executive Kate Nicholls said: “Hospitality is a critical component of the UK economy, with the potential to be at the heart of the Government’s plans to Build Back Better. We can support job creation, levelling up and the road to net zero – but we need the Government to come with us on our recovery journey.”

She added: “Under current plans, VAT returns to its pre-pandemic level of 20% next April, meaning higher prices for consumers just at the time when they can least afford it. For businesses it will undoubtedly set off an inflationary spiral which will undermine wage growth, hit demand and ultimately threaten jobs.”

She also said that this would come at the exact same time as the industry has hit a cliff-edge of the end of business rates reliefs on outdated valuations.

“Currently hospitality pays 10% of the rates bill for an industry that generates around 3% of GDP. On top of this we’re facing a chronic labour shortage, supply chain issues, cost inflation across the board, and rises in the National Living Wage and National Insurance Contributions,” she said.

“Fundamental reforms are therefore crucial to the industry’s survival, a key part of which will be keeping VAT at 12.5% permanently. This will allow us to circumnavigate the monumental challenges we face and enable operators and their teams to concentrate time and resources on what they do best – driving economic growth and serving their communities.”