Hospitality and tourism VAT rises to 12.5%

A temporary reduction in VAT to 5% for certain hospitality and tourism businesses introduced at the onset of the pandemic has come to an end.

VAT for hospitality and tourism rose to 12.5% on 1 October 2021 and will return to its pre-pandemic level of 20% in April 2022 under Treasury plans.

The reduced 5% rate helped many businesses withstand the economic shock of the pandemic, with 77% of businesses answering a survey by a coalition of trade bodies that the reduced rate of VAT has been vital to business.

But the same trade bodies, including UKHospitality, the British Beer and Pub Association and the British Institute of Innkeeping, have called for the Treasury to pull its plans to reintroduce a 20% VAT rate for businesses in hospitality and tourism.

In a joint statement, they said:

"A reduction in VAT has helped many of our businesses survive to this point and was most welcome.

"However, the return of VAT to its pre-pandemic level next year would curtail investment, restrict growth, set back our tourism recovery and risk yet more painful job losses."

In a statement, a Treasury spokesperson said:

"We've always been clear that the lower rate of VAT for tourism and hospitality was a temporary measure to support businesses as they recover from the pandemic."

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