VAT reduction campaign for the Hospitality industry

30 January 2017

Off the back of the UK’s decision to leave the EU, there has been an increased call to the government to reduce VAT for the Hospitality industry in the UK.

It is well known that the industry is price sensitive and highly competitive, so most countries within the EU have reduced their VAT rates on hotel accommodation, restaurant services and admission to amusement parks to help the industry.

The result of this has been quite positive with evidence of increased wages, job creation and, in some cases, saving some businesses from ultimately going under.

Of the 28 EU countries, the UK is one of only three that charge the full rate of VAT on tourism accommodation (the others being Denmark, which has no reduced rates of VAT, and Slovakia). The average VAT rate for accommodation in the other European countries is 10.3%.

VAT Rates On Accommodation In The Five Major European Destinations:  

Country

VAT Rate

Germany 7%
France 10%
Italy 10%
Spain 10%
UK 20%

 

 

 

 

 

 

 

Currently, in the city of Bath (UK), a tourist tax on hotels is being considered. The local authorities are lobbying the government to allow them to introduce this new tax on tourists.

They believe that the revenue derived from it would help the local authorities offset the millions of cuts that they are having to make over the next few years and part of their argument is that many other European cities like Paris, Berlin and Florence already charge a hotel tax.

However, it is important to note that in these same cities and countries, the VAT charged on accommodation is much lower than in the UK.

It is clear that this suggested tax charge on tourists will increase costs and dissuade holidaymakers and this will cause a major uproar for hoteliers and those in the Hotel industry. They already have to deal with major competition from businesses like Airbnb whose customers don’t have to pay VAT cost for their holiday.

In response to this, the British Hospitality Association have increased their efforts and the call for this new tourists tax to not be implemented, but more importantly to have the VAT on accomodation cut significantly. In December 2016, the industry body warned that the number of tourists visiting the UK had dropped for a second consecutive month and this new move would not help matters.

UK industry experts have predicted that a reduction in VAT by just 5% could potentially grow the industry, boost the UK’s GDP by close to £4bn per annum, and create thousands of jobs.

We support the call to reduce VAT rates for the hospitality industry within the UK in line with most other European countries and believe the benefits outweigh any argument that can be made against it.

For further information, please contact your usual MHA MacIntyre Hudson contact.

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