CUT TOURISM TAX
PASC fully supports the Cut Tourism VAT campaign and its proposals for a reduction in VAT for accommodation providers to 5%, including self-catering businesses.
There are almost 200 MP’s who support this campaign so it is alive and well. The founder of the Cut Tourism VAT campaign, Graham Wason, is also a director of PASC. The Cut Tourism VAT team and PASC work closely together and recent developments, such as the Conservative Governments deal with the DUP in Northern Ireland, has brought the debate on the subject firmly back into the spotlight, as a full review of reducing Tourism VAT in the Province is a key DUP requirement.
The self-catering sector is unusual in that the vast majority of businesses in the sector do not reach the VAT threshold. Even if a property is listed on one of the vast agency sites the only VAT is 20% of the booking fee. The market price for a self-catering break is therefore determined by the non-VAT charging market. Those of us that exceed the VAT threshold effectively have to absorb the VAT. Very few, less than 1% of all transactions are business to business, whereby the business can reclaim the VAT.
This puts the professional self-caterer of whom the vast majority have to charge VAT at a massive disadvantage. If week in Devon for three bedroomed cottage is £1500, the professional self-caterer is giving £300 directly to the Chancellor. A similar second home, let directly for £1500, is contributing zero VAT, and a second home of the same size and price is only contributing £75 in VAT, regardless of the agent advertising thousands of cottages.
This anomaly gets worse as small professional self-caterers try to expand. Assuming a fictitious owner had three self-catering cottages, each turning over £25,000 they would be under the VAT threshold. If they tried to expand, with another cottage their turnover would reach £100,000 and they would have to pay the Chancellor £20,000 per annum, because once you are VAT registered it is from zero that you pay. Combined with the fact that this fictitious owner would also move into paying Business Rates is a major issue. Effectively the fourth cottage’s entire turnover would go to the government.
Self-catering probably has the best case for special treatment by the VAT system, and the Government could vary our VAT without resorting to Parliament. Tourism is an area of VAT, even within the EC, that Governments can vary as they please. It is worth noting that the UK is the country in the EC with a decent sized tourism sector that has not reduced VAT for that sector.
Cut Tourism VAT is free to join and we recommend that all our Members do so. You can find out more information here