How would a cut in Tourism VAT help small businesses?
Harry Acland of Notgrove Holidays shares his story, which illustrates vividly how a cut in Tourism VAT would help small or medium sized enterprises (SMEs) like his.
Put simply, the current tax environment has made operating the small hospitality business managed by my wife and I in the Cotswolds almost unsustainable.
Increasing business rates and high VAT on tourism have created a situation where my business’ income is not increasing but my taxes are constantly.
SMEs make up 99% of all businesses in the hospitality and tourism industry, but we feel the playing field is skewed against small enterprises like ours and discourages us from investing and growing.
Take business rates, which have increased 40% a year on my new holiday cottage development. Despite this, Notgrove Holidays was performing well, so we recently expanded our business by adding eight new ‘glamping’ pods.
However, due to this expansion we are faced with a rates increase of £30,000 – which would be nearly 50% of my gross takings for the pods. The system of business rates has punished us for trying to grow our business. I am now being forced to scale back, and regret adding the glamping pods as competition against AirBnB and small operators who pay no VAT or business rates is fierce.
In the situation we currently find ourselves in, we are going to have to cut back our business, which was growing for the past 4 years. Our taxes are so much higher than private operators that we cannot compete.
The movement to cut Tourism VAT gives me hope that there might be action to help small businesses like mine. A cut in Tourism VAT would relieve the difficult position we find ourselves in. I don’t mind paying tax on profits, but if you have to pay 20% tax on gross income it prevents reinvestment and gives no reward.
For every £1 spent on tourism, a further 50p is spent in the wider local economy. This illustrates how a cut in Tourism VAT would not only reward SMEs in our sector for growing, but would benefit small businesses in all other sectors also.
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