U.K. Has No Plans to Extend Sales Tax Cut for Hospitality

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The U.K. government has no plans to extend a cut in sales tax for the hospitality industry, a blow to one of the worst-affected sectors during the coronavirus pandemic.

Chancellor of the Exchequer Rishi Sunak cut value added tax to 5% from 20% for hospitality and leisure in July. The Treasury costed the relief at 4.1 billion pounds ($5.6 billion) for the six months through Jan. 12, but has since extended the reduction through to March 31.

“The relief comes at a significant cost,” Treasury Minister Jesse Norman told the House of Commons on Tuesday. “While the government keeps taxes under review, it has no current plans to extend it further.”

The tax break has helped support over 150,000 businesses and 2.4 million jobs, according to Norman. With the U.K. mired in its third national lockdown since the pandemic erupted last March, pubs, hotels and visitor attractions are struggling to survive.

The industry group UKHospitality warned last week that one in five businesses say they don’t have enough cash to last beyond February. Chief Executive Kate Nicholls said extensions to the VAT cut and to the business rates holiday must be “top of the menu” for the budget that Sunak is due to deliver on March 3.

Separately, another Treasury minister, Kemi Badenoch, told the Commons that a consultation on aviation taxes announced in the last budget in March remains on hold and ministers “will look to proceed once the challenging circumstances the sector is currently facing have eased.”

©2021 Bloomberg L.P.

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