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VAT uplift is unwelcome news

A return to 20 per cent VAT for the hospitality and tourism industry will be met with disappointment by thousands of hospitality businesses, says UKHospitality.

In his Spring statement today the Chancellor’s chose to stick with ending the 12.5 per cent rate. Hospitality businesses fear a rise back to 20 per cent will for jeopardise jobs and restrict the sector’s efforts to stifle price rises for consumers.

UKHospitality chief executive Kate Nicholls said: “This is a real setback for thousands of UK hospitality businesses still suffering the devastating effects of Covid and facing a tidal wave of rising costs. For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal. For a heavily, disproportionately taxed sector a return to 20 per cent dashes the hopes that many businesses could begin to recoup some of the losses of the last two years.”

Locking in VAT at 12.5 per cent, she said and helped hospitality businesses in the ambition to lead the UK back to post-Covid prosperity.

Nicholls added: “Despite today’s disappointment, UKHospitality will continue to work closely with government to achieve the best possible trading conditions for the hospitality industry – which remains the sector best placed to turnaround the economy – and is buoyed by recent support for our 12.5% VAT call from a significant number of MPs.”

 There were more positive elements of the Chancellor’s statement, including plans for a welcome reform of the Apprenticeship Levy, to focus on improving productivity. Additionally, the generous increase in the NIC threshold for employees is considered a very positive move and will boost disposable income, although extending that measure to employers would help hospitality businesses to recruit and retain talent.

“In short, the longer-term measures in the Chancellor’s statement will be positive for those businesses equipped to survive the coming months. However, the opportunity – primarily through retaining VAT at 12.5 per cent – to help more vulnerable hospitality businesses navigate their way through to the autumn has sadly been missed.”

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