Global Accountancy Body Seeks 5% Rate to Support Struggling Businesses
ACCA (Association of Chartered Certified Accountants), a global accountancy body, has called for a permanent reduction in the rate of VAT for struggling hospitality and leisure businesses. The organisation proposes that the government selectively reduce VAT on labour-intensive sectors, such as hospitality and leisure, from 20% to 5% as the Chancellor prepares his first Budget. This measure is intended to ease cost pressures and encourage growth within the industry.
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ACCA states that such a move would bring the UK’s hospitality industry in line with comparable global rates, many of which are significantly lower. The body also believes that a VAT reduction would help alleviate some of the impact on the sector caused by increases in employer national insurance contributions, the minimum wage, and changes to workers’ rights.
Susan Love, ACCA’s Strategic Engagement Lead for Scotland, commented on the situation, stating: “The UK hospitality and leisure industry has been hit hard over the last few years with soaring food and energy prices, reduced consumer spending, increased employment costs and a rising mountain of red tape. Add to this one of the highest tax burdens in Europe and it spells disaster for the industry and the hundreds of thousands of people it employs.” She added that a recent ACCA survey indicated employment taxes were cited by nearly half of respondents as an area of taxation with the greatest negative impact on organisations.
ACCA maintains that the UK’s 20% VAT rate for hospitality is an international outlier and believes the Government should do more to support industries acutely affected by cost pressures. The accountancy body advocates for a selective 5% VAT reduction to encourage growth, employment, and associated tax flow. It suggests that making this cut a permanent structural feature would provide businesses with a strong foundation and the confidence to make long-term plans and investments.
