VAT cut to 5 per cent on food, accommodation and attractions

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  • Mark Caswell
    Keymaster

    Will take effect from next Wednesday until January 12, 2021.

    The government is also giving diners 50 per cent off meals in participating restaurants during August, dubbed “Eat Out to Help Out”.


    SimonS1
    Participant

    Good to see the Government on the front foot….it will be needed in months to come.

    It sounds like there will be more countries added to the quarantine free list in coming days which will help to get things moving.


    HarryMonk
    Participant

    In addition the VAT cut to 5% as well. In theory good for the customer and the businesses. The cynic in me however is suspicious as to whether the full VAT reduction will be passed on the customer. Will a £4.50 pint become a £3.95 pint as it should?


    esselle
    Participant

    In addition the VAT cut to 5% as well. In theory good for the customer and the businesses. The cynic in me however is suspicious as to whether the full VAT reduction will be passed on the customer. Will a £4.50 pint become a £3.95 pint as it should?

    Sadly not Harry, as the VAT cut does not cover alcohol.

    1 user thanked author for this post.

    capetonianm
    Participant

    The cynic in me says that this is only a matter of giving with one hand now and taking back with the other in the future.

    Higher taxes, lower interest rates on NS&I and general savings rates, higher APD just to help travel take off (not!) etc.


    SimonS1
    Participant

    In addition the VAT cut to 5% as well. In theory good for the customer and the businesses. The cynic in me however is suspicious as to whether the full VAT reduction will be passed on the customer. Will a £4.50 pint become a £3.95 pint as it should?

    Sadly not Harry, as the VAT cut does not cover alcohol.

    It wouldn’t trouble me either way to be honest. If businesses use the extra margin to bolster their finances after 3 months of strain that is fine with me.


    flyingcanadian
    Participant

    I am curious to see if Hotel room rates are cut, or will it stay the same and the Hotel just takes the extra 15% in the rate?

    1 user thanked author for this post.

    ontherunhome
    Participant

    With Dynamic pricing it will be impossible to know. Maybe the Travelodge £29.99 room will have to be lower, but I do expect many hotels to just pocket the difference. As a business user, it will put up my costs, as i’ll be able to reclaim less VAT on the headline price. maybe a better idea, would be for overseas visitors, to be able to reclaim VAT on hotels, so it encourages more inbound tourists spending money.


    ASK1945
    Participant

    Reducing the VAT has to be good news for consumers, although in due course the tab will need to be picked up by tax payers, in one way or another.

    So, why the debate about prices? Don’t market forces come into play? Unless anti-competitive moves by agreements between hotel groups to keep the difference happens – surely being watched for by the CMA – I will be no worse off if some hotels decide to keep the VAT reduction to stay in business. If I don’t like that I will book a different hotel.


    WilliamRead
    Participant

    VAT was introduced at the behest of the EU several decades ago; it was attacked at the time, as bureaucratic, costly to administer etc. Now the UK is out of the EU, the opportunity could be taken to review whether VAT is fit for purpose in the 2020s, and examine alternatives.

    3 users thanked author for this post.

    esselle
    Participant

    VAT was introduced at the behest of the EU several decades ago; it was attacked at the time, as bureaucratic, costly to administer etc. Now the UK is out of the EU, the opportunity could be taken to review whether VAT is fit for purpose in the 2020s, and examine alternatives.

    It’s an interesting idea and probably one which will be looked at as part of the exit plan, albeit whatever you call it (it was called Purchase Tax before 1973) it generates a number which forms part of the income the exchequer will have baked into its plans.


    LondonAndy70
    Participant

    VAT was introduced at the behest of the EU several decades ago; it was attacked at the time, as bureaucratic, costly to administer etc. Now the UK is out of the EU, the opportunity could be taken to review whether VAT is fit for purpose in the 2020s, and examine alternatives.

    Although VAT is one of the few taxes that is levied at the point of consumption, and is more difficult (although not impossible) for most people to avoid / evade. For that reason I think it serves a useful purpose. Given many essentials are at 0% or low rates, it means that those who can afford to consume non-essential items pay more, which I guess is fair.

    3 users thanked author for this post.

    LuganoPirate
    Participant

    VAT was introduced at the behest of the EU several decades ago; it was attacked at the time, as bureaucratic, costly to administer etc. Now the UK is out of the EU, the opportunity could be taken to review whether VAT is fit for purpose in the 2020s, and examine alternatives.

    I’m old enough to remember Purchase Tax, but not old enough to recall how it worked. Can anyone enlighten me and was it better than the now VAT??

    Correct me if I’m wrong, but I think many countries have always applied a much lower rate of VAT on hotel accommodation.


    openfly
    Participant

    This is not a 15% price reduction, it’s a 15% VAT cut. I understand that this just means that the merchants only have to submit 5% in VAT, keeping the rest. Should a merchant wish to pass this on by means of price reduction, then all well and good. But it is not mandatory.


    SimonS1
    Participant

    This is not a 15% price reduction, it’s a 15% VAT cut. I understand that this just means that the merchants only have to submit 5% in VAT, keeping the rest. Should a merchant wish to pass this on by means of price reduction, then all well and good. But it is not mandatory.

    Indeed, and for those businesses that have struggled through the last 3 months I wouldn’t stress if they kept prices the same and kept the margin to bolster their battered finances.

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