Dumfries and Galloway’s hospitality and tourism businesses are calling for a VAT reduction to help them cope with the cost of living crisis.
The rising cost of fuel, food and electricity is having an impact on sectors that were already suffering due to coronavirus.
The UK Government dropped the VAT rate for hospitality businesses to five per cent during the Covid pandemic, bringing it back up to 12.5 per cent in the autumn. It returned to the full 20 per cent rate earlier this year.
But South of Scotland Destination Alliance board member Chris Walker believes a return to the lower rate would be a real boost for the industry and help attract visitors.
Mr Walker, who runs The Selkirk Arms in Kirkcudbright, said: “It happens in lots of other countries around the world.
“In Ireland they have a five per cent rate for the hospitality, in Spain it is slightly lower at 12 per cent whereas its 20 per cent for everyone else. That’s to encourage tourism and the operators.
“It’s all down to costs. If we just got a bit of slack on VAT that’s a massive help. VAT was dropped during the pandemic to five per cent and it was a lifesaver. It’s a big bill to pay.”
In last month’s autumn statement, UK Chancellor Jeremy Hunt made no mention of reducing the VAT rate for hospitality.
He did announce the freeze on alcohol duty would end in February but this week the Treasury revealed it would be extended to at least August, 2023.
That move was welcomed by Mr Walker – but he claimed the hospitality industry had been “overlooked” by the Scottish Government in its budget on Thursday as business rates were only frozen, with no rates relief offered.
He said: “We have been crying out for rates relief. The rest of the UK has had six months, we’ve only had three months. Rates relief has been extended in England, ours hasn’t.
“It’s a big cost and I understand it has to be collected but it has to be collected in a fairer way.
“At the Selkirk we have a rateable value of about £65,000 so we are paying just short of £4,000 a month.
“That’s a huge amount that, if we had that rates relief holiday again, it would give us a bit of buffer against the spiralling costs we’ve got.
“We had rates relief when we were closed but we’ve not bounced back to anywhere near where we were pre-Covid but the rates bill hasn’t changed.
“We’re facing costs going up all around us and we’re having to pass it on to customers.”
A Holyrood spokesperson said: “The Scottish budget delivers the number one ask of the business community by freezing the poundage at 49.8p, the lowest in the UK for the fifth year in a row, saving ratepayers £308 million compared to an inflationary increase.
“This ensures that around 250,000 properties in Scotland continue to be liable for a lower property tax rate than anywhere else in the UK.
“We will offer a Small Business Transitional Relief to ensure that properties that lose or see a reduction in Small Business Bonus Scheme or Rural rates relief eligibility, do so in a phased manner.
