In this article, Maria McConnell, VAT Senior Manager with Scottish accountancy firm French Duncan, gives her predictions for what will be included in the Autumn statement, and Marc Crothall, Chief Executive of the Scottish Tourism Alliance, explains why a cut in VAT for the tourism industry could be beneficial for the economy.
“At this year’s Conservative party conference, the Chancellor warned of a “rollercoaster” journey ahead as Britain embarks on the Brexit process. He also indicated he will take a soft and cautious approach to Brexit, which means he will be doing everything he can to protect the economy – that could mean the introduction of several tax incentives for consumers.
“Tourism is one thing that is coming under intense scrutiny at the moment as the value of the pound continues to fall and consumers become more careful about how they spend. The tourism industry has been thriving in Scotland in recent years thanks to EU visitors, but that isn’t going to hold up in light of the Brexit decision.
“The industry may benefit from a reduction in VAT on things like hotel accommodation – a move which could help to increase domestic visitor numbers and create more jobs in the industry. This was introduced in Ireland in 2011 and is now widely spread across restaurants, catering, accommodation and admission to tourist attractions. Perhaps a reduction in the VAT rate will provide a welcome incentive to encourage visitors to holiday at home, rather than abroad, at the same time as giving a helping hand to the job market for the sector.
“In addition, the effect of a much weaker pound may encourage the rest of the world to visit the UK, as it will benefit from more sterling in return for the euro or dollar. If the UK becomes a cheaper holiday destination for overseas visitors, it may also be more cost effective for UK holiday makers to staycation, as going abroad may become more expensive. However, it could also see those British holiday makers who like to have a foreign holiday and UK holiday each year opting to pay the extra costs for their dose of summer sunshine and forego that smaller trip to the Lake District or Scotland, which may have a significant impact on UK tourism revenue.”
Commenting on Maria’s predictions, Marc Crothall, Chief Executive of the Scottish Tourism Alliance said:
“A decision by the Chancellor to cut tourism VAT would of course be welcomed by the Scottish Tourism Alliance, and currently this is one of the key issues which negatively impacts the tourism industry in Scotland.
“At the moment, both visitors and domestic holidaymakers will pay almost three times as much VAT in the UK compared to a French or German break and twice as much as one in Italy and Spain.
“The Cut Tourism VAT campaign has attracted the support of 166 MPs in calling for a reduction on the rate of VAT levied on tourism businesses from 20 per cent to 5 per cent to allow the industry to be more competitive. Around 31 other European countries have a reduced rate of tourism VAT but no exception is made for the sector in the UK.
“Tourism businesses have not only continued to lose ground to our European rivals in attracting domestic and international holidaymakers – the impact is also seen in the amount the tourism businesses can invest in their business. Reducing tourism VAT will lower prices for visitors, but will also allow businesses to increase investment in our businesses and people.
“Research has found that such a reduction would contribute an extra £2.6 billion to HM Treasury over ten years and create 80,000 jobs. Ireland temporarily reduced VAT on tourism from 13.5 per cent to 9 per cent in May 2011, but has kept the cut in place because of the benefits its tourism industry has enjoyed as a result.”