APPG on Hospitality and Tourism supports keeping VAT at 12.5%

The All Party Parliamentary Group (APPG) on Hospitality and Tourism has come out in support of retaining the current 12.5% rate of VAT.

In their report, it was stated that the evidence submitted to the APPG strongly supports the case for retaining the current 12.5% rate of VAT to support the industry in playing a key role in the UK’s economic recovery and the Government’s wider agenda, such as Net Zero and levelling-up.

The inquiry surveyed the impact of the policy in these areas:

• Viability of businesses
• Rate of employment
• Treasury revenue
• Regional growth
• International competitiveness
• Cost of living
• Social wellbeing

Across every area, the inquiry found a substantial case for retaining the current 12.5% rate of VAT and, thus, the APPG recommends this policy remains in place beyond March. These benefits would be the result of businesses being able to retain more of their revenue and make their products more price competitive to drive sales.

This greater liquidity would make businesses more viable, but it would also lead to them reinvesting in areas such as employment and improving their offerings. This reinvestment and ability to keep prices lower would, in turn, lead to greater tax returns for the Treasury after 10 years. The sector will do this through various means, such as increasing consumer purchasing through relatively lower prices and business growth leading to more being paid in corporation tax.

In addition, the policy will deliver tangible benefits to social wellbeing by allowing businesses to reinvest in ways that allow them to better meet people’s needs. As the lower rate of VAT would apply to businesses across the UK, these benefits would be seen across the country. Finally, the lower rate of VAT would allow businesses – through their improved viability and cashflow – to actively engage with the Government’s agenda, such as Net Zero and levelling-up through the support it would provide to regional businesses.

Ultimately, the retention of the 12.5% rate of VAT would allow hospitality and tourism businesses to secure their role as socially responsible economic drivers.

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