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The case for a 5% VAT rate for hospitality

28 September 2011

There is strong evidence for a reduction to 5% VAT for hospitality in a move which could create as many as 310,000 jobs, raise additional tax revenue and reduce VAT fraud

The case for a reduction in the UK

Cost of reducing VAT to 5%:£1.5b to £3.4b (higher end of range applies if alcoholic beverages were included)

Number of jobs that can be created:150,000 to 310,000 (higher end of range applies if alcoholic beverages were included)

Fiscal cost per new job in hotel and restaurant sector:£6,900 to £16,300

Source: VAT Club (Jacques Borel)

VAT and UK job creation
VAT and UK job creation


Other benefits for the UK

â- Less incentive for businesses such as small cafés and B&Bs to stay below the VAT threshold of £71,000
â- Less under-reporting of cash receipts. The "shadow-economy" is currently estimated at about 12% of the total UK economy by the University of Linz in Austria
â- A reduction in the UK's tourism deficit which stood at £20.5b by 2008


The French Experience

In July 2009, France decreased VAT from 19.6% to 5.5% for restaurants and cafés. Hotels were already taxed at the lower rate. Alcohol remained at the higher rate of 19.6%. A report by French senator Michel HouÁ«l in October 2010 and research by Jacques Borel showed that in the 15 months since that move:

€2.6b (£2.3b) Cost to the state for the reduction
€3.1b (£2.7b) Amount repaid by the restaurant industry
2.1% Reduction in café/restaurant prices

French restaurants VAT
French restaurants VAT

http://epetitions.direct.gov.uk/petitions/10288" target="_blank" rel="noreferrer">Sign our petition to reduce VAT to 5% for hospitality businesses.

Support the campaign by downloading and displaying our Slash VAT, Boost Business poster.

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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.

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