Under its new #VATsEnough campaign, the trade body is urging customers, suppliers, hospitality venues and employees to lobby their MPs on the need to lock in the 12.5% VAT rate for local pubs, bars, restaurants, hotels and other sector businesses.
The campaign's launch comes in the wake of the VAT rate for hospitality businesses rising to 12.5% on 1 October from the reduced 5% rate introduced by the Treasury in July 2020 following the first national lockdown.
Under current plans, VAT will return to its pre-pandemic level of 20% in April 2022, just as next year’s peak season begins. However, UKHospitality argues that it should remain at the interim level of 12.5% permanently.
Doing so, it claims, will enable sector businesses to create 125,000 jobs, rebuild their balance sheets, boost investment, avoid damaging price increases, and accelerate the UK’s post-pandemic economic recovery.
New YouGov polling for UKHospitality shows that six in 10 adults (57%) who have a view believe that the hospitality sector VAT rate should not return to 20% next year, while seven in 10 (70%) think the Government has a responsibility to support the sector’s recovery.
Half (49%) of the adult population say they will eat out less frequently if prices were increased in restaurants, pubs and cafes, according to the survey.
Industry experts claim that while businesses will pass on savings where possible, an increase in the rate of VAT from current levels will inevitably lead to rises in some prices in a vulnerable market. Taken together, this suggests a higher VAT rate will dent costumer visits to hospitality venues.
“We’re launching the #VATsEnough campaign because a failure to act risks the future of hotels, cafés, pubs, restaurants and myriad other venues and attractions across the country," says Kate Nicholls, chief executive of UKHospitality.
"Our businesses bring light, life and heart to communities across the country but are battling huge challenges in terms of labour shortages and the food supply chain after 18 months of desperate struggle due to the pandemic.
“By introducing a permanent 12.5% rate of VAT in his autumn Budget, the Chancellor can help us bounce back strongly, keep prices affordable for customers and level up UK jobs. Lower VAT will foster investment in businesses and high streets, accelerating our recovery from the pandemic. Let’s lock in VAT at 12.5% permanently.
“We need the whole hospitality sector, its suppliers, employees and customers to come together and demonstrate to Government how critical the lower rate of VAT is for our sector’s recovery.”
A permanent lower rate of VAT also formed part of UKHospitality's Budget submission to the Treasury, which was published earlier this week.
Other measures suggested include meaningful reform to the business rates system, including a differential, lower rate for hospitality, coming into force in April 2022; and an implementable and equitable code of practice that mandates a sharing of the pain of rent arrears between landlords and closed sectors, including a 50% rent debt write-off for tenants for all closed periods.