Chancellor urged to reduce VAT for tourism industry

A report published this morning by the Country Land and Business Association (CLA) recommends slashing VAT on visitor accommodation and other key tourism services to just seven per cent, in a bid to help boost rural growth.

The Wish You Were Here? report on rural tourism also warns the Chancellor against allowing councils to introduce so-called “bed taxes” – a levy on visitors for every night they sleep in tourism accommodation.

CLA North regional director Dorothy Fairburn said: “Tourism is a major source of diversification for farmers, as well as being the primary business for many who live in the rural North. It is essential that tourism raises its game in terms of quality and scale.”

Ms Fairburn said Britain’s high VAT rate is making it difficult for the owners of small bed-and-breakfasts to compete with continental room prices.

“The CLA is calling on the Government to reduce the rate of VAT to seven per cent, to bring Britain into line with the rest of the EU,” she said. The increase in VAT from 17.5 per cent to 20 per cent – the highest in Europe – has severely restricted the economic viability of rural tourism businesses, and disadvantaged Britain when compared to our European competitors.

“The prohibitively high rate of VAT makes tourism overly expensive for many prospective visitors. It also discourages farmers from diversifying into rural tourism,
because it makes sense for them to be VAT-registered for their farming activities, but not for working as relatively small-time tourism providers.”

Osborne’s challenge: Page 11.