The temporary reduction of VAT rates from 20% to 5% will remain in place until March 31 2021
Chancellor Rishi Sunak has announced the extension of a VAT cut in the tourism and hospitality sectors until March 31 2020. The plans will keep VAT at 5 per cent, down from 20 per cent.
Mr Sunak said the plans would ’help protect 2.4 million jobs through the winter’.
The CLA welcomed the move but said called for the changers to be made permanent.
CLA President Mark Bridgeman said: “The CLA has been lobbying intensively for the VAT cut – from 20 per cent to 5 per cent - to be made permanent by Government.
"This extension will help the sector’s recovery from the first wave, and help weather the storm of the second.
"But for UK tourism to succeed in the long term, we will need to ensure we are competitive with other holiday hotspots such as France, Spain and Greece – all of whom charge far lower than the UK standard of 20 per cent VAT.
“Although the peak trade season is over, we want to be clear to the public that rural tourism businesses have gone to great lengths to become Covid-safe, and continue to work hard to ensure a safe and enjoyable holiday.”
Sue Rathmell, indirect tax partner at MHA MacIntyre Hudson, said previous government measures were a big success but the sector has few defences against a resurgent Covid-19.
“It is very doubtful how helpful the extension of the 5 per ccent rate will ultimately be for the UK’s hospitality sector. Previous measures were very effective. The ‘Eat Out to Help Out’ scheme was definitely a success in getting the public to visit restaurants and the lower VAT rate, where it was passed on, has encouraged people to take holidays in the UK.
“However, given the sharp rise in Covid-19 cases and new government restrictions to try and prevent a second wave, coupled with the arrival of autumn and then winter, demand in the sector will inevitably fall as fewer people take holidays.
“It is not clear what the government can do to improve the situation for the tourism and hospitality sector, but the extension of the VAT cut is a very meagre sticking plaster at best.”