Correspondence between Hospitality Hub and HM Treasury

Released On 19th Apr 2023

Shaun Whitehouse of the Hospitality Hub has been in correspondence with HM treasury twice over a range of cost inducing issues that burden the hospitality sector. The Treasury has responded with the following letters addressed Hospitality Hub: 

"The VAT relief for the hospitality sector was a temporary measure designed to support the viability of sectors that had been severely affected by COVID-19. There are no plans to reintroduce it. 

"VAT is the UK's third largest tax forecast to raise £161 billion in 2023/24, helping to fund key spending priorities such as important public services, including the NHS, education, and defence. The previous VAT relief for tourism and hospitality cost over £8 billion and introducing a 10 per cent rate would come at a significant further cost.

"It was appropriate that as COVID-19 restrictions were lifted and demand for goods and services in these sectors increased, the temporary tax reliefs were first reduced and then removed in order to rebuild and strengthen the public finances.

"However, the Government recognises the impact of COVID-19 on the tourism industry, which is why the Government published the Tourism Recovery Plan to help the sector return to pre-pandemic activity levels as quickly as possible. Since the start of the pandemic, over £35 billion has been provided to the tourism, leisure and hospitality sectors in the form of grants, loans and tax breaks.

"The Government also understands businesses are struggling with the cost-of-living crisis. At Autumn Statement 2022, the Government announced a package of support worth £13.6 billion for businesses over the next five years. Together with the revaluation, this package ensures bills will more accurately reflect current market values whilst protecting businesses from large bill increases. Businesses in the retail, hospitality and leisure sectors, including pubs, will receive a tax cut worth over £2 billion in 2023-24. Eligible properties will receive 75 per cent off their business rates bill, up to a cap of £110,000 per business. The Government has also committed to freezing the multiplier for a further year, which is a tax cut worth £9.3 billion to businesses over the next 5 years, and means all bills are 6 per cent lower, before any reliefs or supplements are applied, than without the freeze.

"On 9 January, the Government also announced that it would be launching a new energy support scheme for businesses, charities and the public sector. The Energy Bills Discount Scheme (EBDS) will provide all eligible businesses and other non-domestic energy users with a discount on high energy bills for 12 months from 1 April 2023 until 31 March 2024. It will also provide businesses in sectors with particularly high levels of energy use and trade intensity with a higher level of support. This follows an unprecedented package of support for non-domestic users through the Energy Bill Relief Scheme last winter. 

"EBDS will help those locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again. 

"The Government recognises the important contribution pubs and hospitality venues make to our society and is committed to supporting this sector through the duty system by reducing the tax burden on products sold in these venues. This is why, as part of the historic alcohol duty reform, the Government announced that it will ensure a duty differential between on and off-trade, reducing the duty on draught beer and cider by 9.2% and draught wine, spirits and other fermented products by 23% from 1 August 2023.

"Further, on 19 December, the Government announced that the freeze to UK alcohol duty rates has been extended for six months to 1 August 2023. This decision was made to provide certainty and reassure pubs and alcohol producers as they face a challenging period ahead.

"While the Government has no current plans to reduce the rate of VAT for the hospitality sector, all taxes will continue to be kept under review." - HM Treasury

A long awaited response to a letter sent on the 17th of February covering similar issues was also responded to with the following: 

"Thank you for your correspondence dated 17 February to the Chancellor of the Exchequer, regarding VAT and its impact on the hospitality sector. As it is not practical for ministers to respond personally to all the correspondence they receive, I have been asked to reply. I would like to apologise for the delay you have experienced in receiving a response.

"I am sorry to hear of your difficulties both in the pandemic and now with the increased cost of living, the Government appreciates the role the hospitality sector plays in the UK economy.

"VAT has been designed as a broad-based tax on consumption, and the twenty per cent standard rate applies to the majority of goods and services. While there are exceptions to the standard rate, these have always been strictly limited by both legal and fiscal considerations.

"Reducing the main rate of VAT would impose significant additional pressure on the public finances, to which VAT makes a significant contribution. VAT is the UK’s third largest tax and is forecast to raise £161 billion in 2023/24, helping to fund key spending priorities such as important public services, including the NHS, education and defence. Any loss in tax revenue would have to be balanced by a reduction in public spending, increased borrowing or increased taxation elsewhere.

"In addition, this request should be viewed in the context of over £50 billion of requests for relief from VAT received since the EU referendum.

"The Government keeps all taxes under review and welcomes representations to help inform future decisions on tax policy, as part of the tax policy making cycle and Budget process Thank you for taking the time to make us aware of your concerns."

Yours sincerely,

Correspondence & Information Rights Team HM Treasury