The Chancellor of the Exchequer Rishi Sunak unveiled his 2021 Budget on 4th March.
Following extensive lobbying from the CLA and other business groups, Mr Sunak announced that the 5% reduced VAT rate for the hospitality and tourism sectors will be extended until September 30 followed by an interim rate of 12.5% for further six months.
The standard rate will not return until April next year saving the sector an estimated £5bn.
Furthermore, the current business rates holiday will be extended through to the end of June.
In response, Mark Bridgeman, President of the Country Land & Business Association, said:
The extension of the 5% VAT rate is a lifeline for many small tourism and hospitality businesses who have faced crippling consequences of the Covid-19 pandemic
VAT cut extended for further six months
“The extension of the 5% VAT rate is a lifeline for many small tourism and hospitality businesses who have faced crippling consequences of the Covid-19 pandemic. It will allow tens of thousands of businesses breathing space to begin their recovery in 2021, further boosted by hopes of a bumper summer season as lockdown restrictions are eased further.
“But the extension is a short term crisis response. Government should now begin thinking of how the UK’s tourism and hospitality sectors can thrive in the long term. If we are to compete with other major tourism destinations in Europe – all of whom have VAT rates far below 20% - the UK’s VAT rate should remain at 5% permanently. We estimate this move would add £4.5bn to the national economy, leading to more demand, more investment and more good jobs being created.”
Business rates extended until June
“The past 12 months has led to huge changes in the performance of many rural businesses especially in the leisure, hospitality and tourism sectors, with reduced turnover combined with extra costs of sanitisation. Therefore, an extension of the business rates holiday until the end of June is welcome news for the sector and is something the CLA has been lobbying intensively for.”