Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the effect of extending the 12.5 per cent VAT rates until the end of 2022 to help hospitality businesses.

The temporary reduced rate of VAT was introduced on 15 July 2020 to support the cash flow and viability of around 150,000 businesses and protect over 2.4 million jobs in the hospitality and tourism sectors. As announced at Spring Budget 2021, the Government extended the 5 per cent temporary reduced rate of VAT for the tourism and hospitality sectors until the end of September. On 1 October 2021, a new reduced rate of 12.5 per cent was introduced for these goods and services to help ease affected businesses back to the standard rate. This relief ended on the 31 March 2022.

The Government has been clear that the reduced rate of VAT for hospitality and tourism was a temporary measure designed to support the sectors that have been severely affected by COVID-19. It was appropriate that as restrictions were lifted and demand for goods and services in these sectors increased, the temporary tax reliefs were first reduced, and then removed, in order to rebuild and strengthen the public finances.