Hospitality Industry: VAT
The question
To ask the Chancellor of the Exchequer, what assessment she has made of the the potential merits of changing the VAT registration threshold for hospitality businesses.
Answered by Dan Tomlinson
At £90,000, the UK has the second highest registration threshold among all 38 OECD countries, which keeps the majority of businesses outside the VAT system.
VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. Reduced rates of VAT come at a significant cost to the Exchequer and reduce the revenue available for vital public services. Any reduction in tax revenue would mean higher borrowing, lower spending, or increases in other taxes.
HMRC estimates that reducing the standard rate of VAT to 10% on accommodation and food and beverage services would cost approximately £11 billion a year.
The Government is already supporting hospitality through targeted measures, including permanently lower business rates multipliers, a £4.3 billion business rates support package, and the temporary Great British Summer Savings scheme, which will reduce VAT from 20 per cent to 5 per cent on eligible family attractions and children's menu meals between 25 June and 1 September.
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