The UK’s rate of VAT on visitor accommodation and attractions (Tourism VAT) at 20% is double the European average. This particularly disadvantages Northern Ireland’s hospitality and tourism businesses as Tourism VAT in Ireland is levied at 9%.
Across Europe 33 countries have a reduced rate of VAT on tourism. The UK charges 20% VAT for visitor accommodation, compared to 7% in Germany, 9% in Ireland, and 10% in Spain and Italy.
A reduction could be brought into effect immediately, as there is no need for legislation at the national or EU level.
A reduction in the rate of tourism VAT to 5% will stimulate investment and consumer spending and contribute £4.6 billion to the Exchequer over 10 years, and lead to a reduction in the UK’s balance of trade deficit by £23 billion over 10 years.
The hospitality and tourism industry is a lynchpin of the UK economy, our fourth largest industry, employing 4.49 million people. Hospitality alone accounted for one in five of all new jobs created in the UK between 2010 and 2014. Over the past five years the industry has delivered 331,000 new jobs and is on track to deliver a further 100,000 new jobs by the end of the decade. It represents 10% of GDP, equivalent to £143 billion.
The Campaign for Reduced Tourism VAT is supported by groups and associations representing over 45,000 member establishments. This includes the British Hospitality Association, Merlin Entertainments plc, Bourne Leisure, Haven Holidays, Hilton Worldwide, Premier Inn Travel Lodge, the Caravan Club and the British Association of Leisure Parks, Piers and Attractions.
A Case Study on Tourism VAT in Northern Ireland and the Republic of Ireland
Eddie McKeever of McKeever Hotels Group operates both in Northern Ireland (Tourism VAT at 20%) as well as the Republic of Ireland (Tourism VAT at 9%).
As a family business that operates on both sides of the border he has been surprised at the difference in the hotel’s net earnings.
The 11% difference in VAT has benefitted his hotel in the Republic of Ireland.
Employment: Eddie has been able to create more jobs than he initially forecasted.
Internally, additional staff have improved customer service, leading to increased revenue and customer retention. Externally, more jobs in the local community have had a positive effect on the local economy.
Investment: A lower Tourism VAT rate gave Eddie the confidence and extra resources to fully refurbish one of their hotels in 1 year, rather than the 2 years initially forecasted. This injected funds into the local economy and had a positive effect on the regeneration of the town centre.
Current MPs supporting the Campaign can be found here
Detailed financial highlights can be found here
With a two-page factsheet here