Scottish hospitality firms plead for VAT cut to help venues cope with soaring inflation rates

The rate of VAT should be reduced to help hospitality businesses deal with soaring inflation, an industry body has said.

The Scottish Licensed Trade Association (SLTA) says the industry is still recovering from the pandemic and is now dealing with rising costs.

VAT was reduced to 5% for the hospitality and hotel sectors in July 2020, later going up to 12.5%. It returned to the standard rate of 20% at the beginning of April this year.

Official data showed that Consumer Prices Index (CPI) inflation rose to 9.4% in June, up from 9.1% in May and remaining at the highest level since February 1982.

Colin Wilkinson, the managing director of the SLTA, said staffing issues were also affecting businesses.

He said: “The temporary reduction of VAT from 20% to 5% from July 2020 to support businesses during the pandemic was hugely appreciated by the hospitality industry but its return to the standard rate from April 1 has coincided with an unprecedented rise in inflation and also food and energy costs.

“Businesses are struggling so it goes without saying that their customers are struggling, too.

“After enforced closures and restrictions during the pandemic, the spiralling cost-of-living crisis and ongoing staffing issues now having an impact on licensed hospitality and many other sectors, it is crucial that both the UK and Scottish Governments listen to our concerns.

“Many businesses no longer open seven days or they open later in the day because of rising energy costs and lack of staff so a cut in VAT would go a long way to helping them on the road to recovery and provide much-needed support over what will be a very difficult few months.”

He continued: “It really is no exaggeration to say that the hospitality industry is still very much in recovery mode although we accept that there are some examples of businesses that are performing well due to their location and business model.

“However, the majority are simply not in a position to cope with these soaring utility bills, fuel increases and the sharp rise in the cost of food and drink – they need help and they need it now.”

A Treasury spokesman said: “We’ve stood behind the hospitality sector throughout the pandemic with £400 billion package of economy-wide support that saved millions of jobs.

“And at the Spring Statement we went further, announcing a £1,000 increase to the Employment Allowance which will cut taxes for hundreds of thousands of businesses.

“Eligible high street businesses also get 50% off business rates bills and benefit from a freeze to the business rates multiplier, which puts the brakes on bill increases and is worth £4.6 billion over the next five years.

“We’ve always been clear that the lower rate of VAT was a temporary measure and it’s right our support reflects the fact the economy has reopened.”