VAT Reduction Tourism and Hospitality 2021-04-27
2021-04-27
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Response quality
Questions & Answers
Q1
Direct Answer
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Context
The question follows from a government announcement extending VAT reductions to support businesses. It aims to understand the assessment of these measures' effects on economic recovery in the context of job protection.
What assessment his Department has made of the effect of the temporary reduction in VAT for businesses on the recovery of the (a) tourism and (b) hospitality sectors from the covid-19 outbreak?
The temporary reduced rate of VAT aims to support the cash flow and viability of around 150,000 businesses and to protect more than 2.4 million jobs. As was announced at the Budget, the Government extended the temporary reduced rate of VAT to 31 March 2022, with a phased return to the standard rate. This relief alone is estimated to be worth more than £7 billion to the tourism and hospitality sectors.
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Assessment & feedback
Response accuracy
Q2
Partial Answer
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Context
Acknowledging the significant role of these sectors in economic recovery, the questioner seeks further support through a permanent VAT reduction.
The past year has clearly illustrated just how important the hospitality and tourism sectors are not only to our economy, with the jobs and businesses they support in the supply chain, but to our overall wellbeing and the contribution they make to social mobility. As the chair of the all-party parliamentary group for hospitality and tourism, I know just how important this cut in VAT has been in supporting those businesses, but will the Treasury take another look at the merits of making this reduction permanent to further support the sector and the growth in jobs that it can create?
My hon. Friend is absolutely right that this has been an incredibly challenging period for the tourism and hospitality sectors, and it is also right to recognise that many organisations within these sectors have benefited from the measures that I have described, including the extensions to the employment schemes, business rates holidays and the VAT reduction, as well as the very important wider restart grants and the additional restrictions grant. As these restrictions are lifted and demand for goods and services in these sectors resumes, temporary reliefs are being phased out and in time will be removed. Bridging that transition to a standard rate by applying a temporary 12.5% rate will help businesses to manage the change.
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Assessment & feedback
Permanent VAT reduction for hospitality and tourism sectors
Phased Out And In Time Will Be Removed
Temporary 12.5% Rate
Response accuracy