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VAT rate change: Winners and losers

VAT rate change: Winners and losers

Thursday, 09 July 2020

It has been a theme of every statement made by the Government (and particularly the Chancellor) throughout the pandemic, that there are winners and losers (or those who lose and those who really lose, given there can be no real winners). Therefore, we examine who may broadly benefit from the VAT changes announced in the Summer Statement and who will not (at least in broad terms).

The winners

Hotels, B&Bs and campsites

After months of not being able to accept paying guests, the accommodation sector will welcome a reduction in the rate of VAT at a time when bookings are likely to be surging as the UK enjoys a renewed love of the staycation.

Restaurants and cafés

As with the accommodation sector, restaurants and cafes are likely to be seeing bookings pick up. A reduction in the rate of VAT will once again be welcome to either encourage customers through the door or to help reduce losses where costs have continued to be incurred over the last few months without any corresponding income.

Commercially run attractions

The other winners are the attractions which are now reopening to families who have had limited opportunities to get out and have some fun for the last few months.

The losers

Pubs not serving food

As seen on the stock market, the initial excitement at the reduction of the VAT rate was quickly followed by disappointment that the reduction did not extend to alcoholic beverages. Therefore, pubs which are not serving food are unlikely to see any great benefit from the change.

Not for profit attractions

Many not for profit attractions benefit from VAT exemption on admission income, with zoos and museums being the most common to have utilised the exemption. For these attractions, a reduction in the VAT rate makes no difference to their VAT position, although they may well have visitors wondering why prices remain unchanged.

The public

As mentioned in the Larking Gowen Tourism Survey, many of the businesses who will benefit from the VAT changes would expect these to merely reduce losses for the year. Furthermore, many are operating on restricted capacity, so could not reduce prices to increase footfall when all tickets are sold and tables are booked.  Therefore, it’s possible that many businesses affected will use the VAT rate change to offset against the significant costs incurred in the last four months.

One upside for the public who don’t see a reduction in prices must be that at least this gives their favourite hospitality spots a fighting chance of still being here next summer.

For more information, please get in touch with your usual contact. You can find contact details on the Our People section of the Larking Gowen website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Rob Skilton

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