Hospitality Industry and Retail Trade: VAT
The question
To ask the Chancellor of the Exchequer, if she will make an assessment of the potential impact of reducing the rate of VAT on retail, hospitality and leisure from 20% to 13% on that sector.
Answered by Dan Tomlinson
The Government recognises the significant contribution made by retail and hospitality businesses to economic growth and social life in the UK.
VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. Tax breaks reduce the revenue available for vital public services and must represent value for money for the taxpayer.
HMRC estimates that the cost of reducing the 20 per cent Standard Rate of VAT on all accommodation and food and beverage services would be as follows in 2026-27: (a) to 15%: £5 billion, (b) to 12.5%: £8 billion (c) to 10%: £10.5 billion, (d) to 5%: £17 billion, (e) to 0%: £23.5 billion. Including retail would add to that significant cost.
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