Hospitality Industry: VAT

Treasury written question – answered on 20th October 2021.

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Photo of Greg Smith Greg Smith Conservative, Buckingham

To ask the Chancellor of the Exchequer, what assessment he has made of the effect on employment in the hospitality sector when VAT is returned to 20 per cent for this sector.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

To ask the Chancellor of the Exchequer, what assessment his Department has made of the potential effect of a higher rate of VAT on debt repayment by businesses in the hospitality and retail sectors.

Photo of Gregory Campbell Gregory Campbell Shadow DUP Spokesperson (International Development), Shadow DUP Spokesperson (Cabinet Office)

To ask the Chancellor of the Exchequer, if he will extend the 12.5 per cent VAT rate for the hospitality sector beyond 31 March 2022.

Photo of Greg Smith Greg Smith Conservative, Buckingham

To ask the Chancellor of the Exchequer, what recent discussions he has had with representatives of the hospitality industry on the impact of VAT rates returning to 20 per cent by 2022.

Photo of Greg Smith Greg Smith Conservative, Buckingham

To ask the Chancellor of the Exchequer, what recent assessment he has made of the projected level of economic activity in the hospitality sector when VAT returns to 20 per cent in the sector.

Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury

The temporary reduced rate of VAT was introduced on 15 July 2020 to support the cash flow and viability of around 150,000 businesses and protect over 2.4 million jobs in the hospitality and tourism sectors. As announced at Budget 2021, the Government has extended the temporary reduced rate of VAT of 5% for the tourism and hospitality sector. This relief ended on 30 September. On 1 October 2021, a new reduced rate of 12.5% was introduced to help ease affected businesses back to the standard rate. This new rate will end on 31 March 2022.

This relief will cost over £7 billion and, while all taxes are kept under review, there are no plans to extend the 12.5% reduced rate of VAT. The Government has been clear that this relief is a temporary measure designed to support the cash flow and viability of sectors that have been severely affected by COVID-19. It is appropriate that as restrictions are lifted and demand for goods and services in these sectors increases, the temporary tax reliefs are first reduced and then removed in order to rebuild and strengthen the public finances.

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