Sunak mulls VAT cut extension as hospitality presses for more support

22-Mar-2022 - Last updated on 22-Mar-2022 at 10:54 GMT

Chancellor Rishi Sunak is reportedly considering a freeze in VAT for hospitality businesses at the current reduced rate of 12.5% beyond April in his Spring Statement tomorrow (23 March).

According to the Daily Mail, the Chancellor is believed to be examining whether to extend the current VAT cut, a move that is widely considered by business to be vital to the sector's long-term viability.

At present the VAT rate for hospitality businesses is set to revert back to its pre-pandemic level of 20% in April following a series of reductions made by the Treasury over past two years in response to the Coronavirus pandemic.

The sector has been campaigning to make the 12.5% rate permanent for some time.

In February, more than 250 leaders from the hospitality and leisure sector signed a joint letter to the Treasury calling on the Chancellor to maintain the current VAT level to enable businesses to continue their recovery, protect jobs and help stave off higher inflation in the economy.

More recently, UKHospitality chief executive Kate Nicholls told a Government select committee that retaining the 12.5% rate for hospitality and tourism is vital if the UK is to remain competitive versus international rivals, attract visitors from abroad and encourage Britons to go out and spend.

And in the last week the All Party Parliamentary Group (APPG) for Hospitality and Tourism concluded in a report on the retention of the 12.% rate that VAT should not return to 20% in April, citing UKHospitality data revealing that the lower rate would bring benefits including jobs, international competitiveness and social wellbeing.

Simon Jupp MP (East Devon), Chair of the Hospitality and Tourism APPG, said: “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.”

Thousands of businesses 'at the mercy' of Chancellor's Budget

The Chancellor is reported to be plotting a host of tax cuts and freezes is this week's Spring Statement amid mounting pressure over the surging cost of living.

Businesses across the hospitality sector have seen cost inflation soar over the last few months, with many relying heavily on tomorrow's mini Budget to alleviate some of the financial pressures from rocketing supply, energy and fuel costs.

The Night Time Industries Association (NTIA), which represents more than 1,200 independent bars, clubs and live music venues across the UK, warns that unless urgent support is given, there will be a catastrophic effect on the economy with many cafes, restaurants, bars, hotels, venues and nightclubs forced to close due to escalating costs, sending thousands of people out of work.

“We must now rely on the Chancellor once again, in his mini budget, to shore up the financial support and relief to allow headroom for businesses to survive, in light of the current debt levels and cost inflation, specifically around VAT, energy and fuel,” says Michael Kill, CEO of the NITA.

“Billions of pounds in public funding will be wasted if the Chancellor lifts taxes within the budget, crippling an industry that has worked hard to survive, only to be let down at the last hurdle.”

“The rhetoric from Government of 'Leave no one behind' is becoming a distant memory for businesses that committed to supporting the Government's public health strategy, but have been left once again awaiting their fate.”