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Hospitality Industry and Tourism: VAT

Question for Treasury

UIN HL1851, tabled on 8 July 2021

To ask Her Majesty's Government what plans they have, if any, for a permanent cut in Value Added Tax for the hospitality and tourism sector.

Answered on

19 July 2021

In order to support the cash flow and viability of about 150,000 businesses and to protect over 2.4 million jobs, the Government has applied a temporary reduced rate of VAT (5 per cent) to goods and services supplied by the tourism and hospitality sectors, which will now end on 30 September 2021. On 1 October 2021, a new reduced rate of 12.5 per cent will be introduced for these goods and services to help affected businesses manage the transition back to the standard rate. The new rate will end on 31 March 2022.

The reduced rate of VAT has been designed as a temporary measure. As restrictions are lifted and demand for goods and services in the tourism and hospitality sectors increases, this relief will be reduced and eventually removed in order to rebuild and strengthen the public finances. This policy will cost the Exchequer over £7 billion. While the Government keeps all taxes under review, there are no plans to make the reduced rate of VAT permanent.

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