Will my Cornish trip cost less due to the VAT cut?
Q We have a holiday hotel booked in late August in Cornwall, for which the agreed rate is £1,220. Following the chancellor’s announcement that he is cutting VAT from 20 to 5 per cent on tourism businesses, I was looking forward to a cheaper holiday. But the hotelier says he doesn’t have to pass the saving on, and will instead use the cash to cover the extra costs related to coronavirus. Surely that 15 per cent is either mine or the government’s – not the hotel’s?
Gordon M
A Rishi Sunak’s plan is to stimulate fresh business for the UK’s deeply wounded tourism industry, by making the cost of accommodation 12.5 per cent cheaper (trust me, that is the effect on overall prices of the cut from 20 to 5 per cent VAT). It was not to generate a windfall for people such as you who have already booked.
Had you originally negotiated a deal with the hotel for £1,017 plus VAT, rather than £1,220 including tax,
then you would be looking at a very handy saving of £153. As it is, the convention in the UK is to quote rates including VAT. Therefore the tax saving will stay with the hotel – which will no doubt be delighted that it can start making up for the catastrophic few months when tourism in Cornwall and the rest of the UK dried up completely. The margin will also, as the hotelier has pointed out, help to pay for additional staff and equipment.
Some people may be tempted to see if they can cancel existing reservations without penalty and immediately rebook at the lower rate of tax. That may be possible for you. But, as you know, hotel rates are extremely fluid and depend on demand. With evidence that millions more will be holidaying in the UK than usual, it may even be that the hotelier can charge more than you originally paid.
Instead, I propose a compromise: ask if you can get a credit for use in the hotel’s restaurant or bar, or even an extra night. The hotelier will still derive benefit from the extra cash, and you may be more inclined to make a repeat visit.
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