Hospitality VAT cut may not be passed on to UK consumers

Shoppers and tourists expecting to see a cut in prices on Wednesday following the chancellor’s decision to slash VAT on hospitality could be in for disappointment as some organisations pocket the saving rather than pass it on to consumers.

Last week Rishi Sunak announced that the tax, which is charged on most goods and services, would be cut from 20% to 5% from 15 July until 12 January 2021 for entrance to restaurants, cafes, hotels and attractions such as zoos and cinemas.

The chancellor described the move as a “£4bn catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere”. Accountants at Deloitte said families stood to save more than £5 on a £45 meal out and even more on entrance to attractions.

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However, some companies and organisations contacted by the Guardian said they were still deciding whether to pass on the reduction to customers, while others said they had decided against it.

The National Gallery said that tickets to its paid-for exhibition of the works of Titian would not fall in price following the tax cut.

“We, like other cultural venues, have lost money as a result of the coronavirus lockdown,” it said in a statement.

“Therefore, we have taken the decision to maintain Titian ticket prices as current and not reduce in line with the VAT reduction on attractions and tourism. This is so we can use the reduced VAT to help us repair our finances for the future.”

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IHG Group which runs hotels under a number of brands including Holiday Inn and Crowne Plaza said it would be passing on the cut to corporate bookings, but as franchised business it could not confirm that all of its outlets would reduce prices for consumers.

Center Parcs, McDonald’s and Pizza Hut all said they were studying the detail of the cut and working out how to respond to it.

Best Western, which operates 300 hotels, said it would be reducing the price of rooms and food in line with the cut on bookings made from Wednesday. Anyone who had already booked a room will be subject to the old rate of 20%.

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Mexican restaurant chain Wahaca said it would pass on the cut in full to diners from Wednesday. This means a fish taco dish previously priced at £6.95 has come down to £6.10. Waitrose also confirmed it would reduce prices in its cafes, and Starbucks said it would pass on the cut to customers.

The Treasury said: “We want businesses to pass on the benefit to customers if they can, and almost four fifths of businesses said they did so in 2008.

“But we recognise that many of these businesses have been closed and without income for months, and decisions on prices are ultimately for businesses rather than the government.”

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