BHA to study impact of lower VAT rate on hotels

25-Nov-2009 - Last updated on 29-Nov-2010 at 11:29 GMT

Related tags Vat rate British hospitality association Hotel

The BHA will look into the impact a reduced VAT rate will have before making a decision

The British Hospitality Association is to look at the impact a reduction in VAT would have on hotels following calls to bring the rate down while members of the industry have their say

The British Hospitality Association is to study the impact a reduction in VAT would have on the hotel and restaurant sectors, including how customer demand would increase, how it could be passed on to customers and the effect it would have on jobs.

A spokesman for the association said it would also look at how the lower VAT rates introduced for accommodation in Germany and for restaurant meals in France had affected businesses in those countries.

Earlier this week accountancy firm PKF called for the VAT rate to be dropped to 5 per cent for hotels in the UK to give the industry a 'much needed boost' and help make it competitive with its European counterparts.

However, the BHA said it was 'important' to have 'facts and figures before the industry embarked on any call for a reduction in VAT.'

The BHA said if results from the study were favourable it would prepare and submit a paper on the subject to the government next year.

The industry's view

Scott Harper, group operations director for Malmaison and Hotel du Vin welcomed the idea and said the company would be in favour of any initiative that increased the buying power of guests and consumers, but expressed doubts that the government would agree to it.

"I would imagine that with the unprecedented debt mountain created by the current recession that this is something the government would fight against and is an area we are concerned may rise even further than the 17.5 per cent which it is planned to return to in January - a new or re-invigorated government at the start of its term of office may be tempted to up it even further to help balance the books," he said.

However, Pat Murphy, of Tan Y Onnen Guest House in St Asaph, Wales, said dropping the VAT rate would have an adverse affect on B&Bs and indpendent hotels because it would drive prices down and 'cheapen the offer'.

He said: "I don't think dropping the rate to 5 per cent will have a stimulus effect. We didn't raise our prices this year because of the recession and I wish I'd put them up, because we've been so busy."

Murphy said the weak pound against the euro and the dollar had been more of a boost to the industry this year than the 2.5 per cent drop in VAT.