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The temporary reduced rate of VAT was introduced on 15 July 2020 to support the cash
flow and viability of around 150,000 businesses and protect over 2.4 million jobs
in the hospitality and tourism sectors. As announced at Spring Budget 2021, the Government
extended the 5 per cent temporary reduced rate of VAT for the tourism and hospitality
sectors until the end of September. On 1 October 2021, a new reduced rate of 12.5
per cent was introduced for these goods and services to help ease affected businesses
back to the standard rate. This new rate will end on 31 March 2022.<p> </p><p>All
taxes are kept under review, but there are no plans to extend the 12.5 per cent reduced
rate of VAT. This relief has cost over £8 billion. Applying a reduced rate of VAT
for a longer period would impose additional pressure on the public finances, to which VAT
makes a significant contribution.</p>
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