Thank you for contacting me about VAT rates and the hospitality sector.
I know that this issue is of importance to a number of individuals and businesses across Hastings and Rye, as well as the UK more generally.
The temporary reduction in VAT to 5 per cent instead of 20 per cent for hospitality and tourism businesses, which was previously extended until 31 March 2021 and subsequently put in place until 30 September 2021, is changing to 12.5 per cent and will remain so until 31 March 2022. The scope of the relief will remain unchanged over this period and I am not currently aware of any plans to make this reduction permanent, but I will continue to engage with my Ministerial colleagues on this topic accordingly.
Whilst I have consistently lobbied the Chancellor to retain the 5% rate, I do welcome the Chancellor’s announcement that businesses will be able to spread their deferred VAT repayments over 11 smaller, interest-free repayments. This will benefit almost half a million businesses who have deferred £30 billion worth of VAT this year alone.
Finally, I do recognise that in the past some EU Member States have implemented a lower rate of VAT on tourism and hospitality businesses compared to the UK. However, comparisons with these countries tended not to take into account the significant VAT relief the UK provided for cultural attractions and public transport, or other tourist taxes that some member states choose to levy. Additionally, the UK’s VAT registration threshold is high when compared to many EU Member States, so many tourist attractions did not have to charge any VAT to their customers.
Thank you again for taking the time to contact me about this important issue.
Sally-Ann Hart MP