BHA says VAT will be added to bed tax

27 April 2006
BHA says VAT will be added to bed tax

Caterer‘s Say No To Bed Tax campaign has attracted overwhelming industry support, with more than 1,000 hospitality operators and owners already signing our petition.

The battle is not yet won, however, as the Government could still go ahead with the 5-10% tax on room nights across the UK, despite increasing opposition to the tax from all sectors of the industry.

And further fears were raised this week after the British Hospitality Association (BHA) warned that the bed tax would also be subject to VAT. A bed tax of 7.5% would therefore rise to 8.8% after VAT (see table).

This would take the total tax demand on overnight accommodation to 23.4%, not 22.5%, making the UK the second-highest taxed country in Europe, behind Denmark at 25%.

BHA deputy chief executive Martin Couchman said: "Obviously, the tax is a bad idea but the ramifications become worse if you look at the details."

The AA's business manager of hotel services, Albert Hampson, also raised concerns that with the Olympic Games approaching in 2012, the Government should be trying to grow tourism revenue by encouraging investment and raising quality.

"A tax on beds, if absorbed by the industry, may reduce funds available for investment and if passed directly on to the consumer, may make Britain's tourism offering even less competitive," he said.

Anthony Lee, general manager of London's Connaught hotel, also stressed the tax would damage businesses by preventing hoteliers from reinvesting in their properties.

"It's another stealth tax and it's outrageous," Lee said. "Just as revenues start coming back, the Government hits us again. We need to reinvest that money in our businesses. We have suffered enough."

Margaret Jones, events co-ordinator at the Horn of Plenty in Devon, said the region was still recovering from the effects of foot-and-mouth disease. "The Government must be completely mad - it's another nail in the coffin," she said.

Marie Grogan, assistant manager at the West Lynne in Manchester, concurred: "This tax will have the knock-on effect of driving down revenue and lowering standards. We simply won't be able to offer the same service."

Simon Hirst, general manager at London's One Aldwych, added: "It's astonishing that the Treasury would be making it more expensive for people to visit this country.

"The Treasury should be helping us reduce costs, as then revenues would be better and their tax haul would increase."

\* If you want to support our Say No To Bed Tax campaign, fill in our petition opposite and return it FREEPOST to Caterer, or sign up online
Bed tax… the story so far

2004 The Association of London Government launches a research project to discover the most efficient way of increasing local government funding.

14 July 2004 Sir Michael Lyons is appointed head of an inquiry into local government.

4 October 2004 Submissions are invited for the inquiry.

15 April 2005 Final date for initial submissions. The report from the Association of London Government recommends a "bed tax" as
the most appropriate option. Tourism Alliance urges the Lyons Inquiry to reconsider its proposal to introduce bed tax. It claims the move would produce only £4.5m in extra revenue per London council. The BHA tells the inquiry that bed tax, as well as being damaging to the UK tourism industry, would be costly to collect.

15 December 2005 Interim report released by the Lyons Inquiry. Further submissions are invited.

January 2006: The BHA highlights bed tax's threat to tourism.

February 2006 Budget hotel chain Travelodge conducts a consumer survey on bed tax and how it would impact holiday habits.

13 March 2006 Lyons Inquiry consultation process closes.

Travelodge starts a consumer campaign against bed tax following its submission to the inquiry, which included a survey showing that 89% of UK holiday-makers deem an additional tax on UK holidays unfair.

13 April 2006Caterer and Hotelkeeper launches its industry campaign Say No To Bed Tax. Travelodge receives more than 50,000 e-mails from consumers supporting its campaign. It seeks a meeting with Lyons, the BHA, consumer groups and MPs.

May 2006 Lyons Inquiry will announce whether it is still considering a bed tax.

December 2006 The final report with recommendations on local government funding will be presented to the deputy prime minister and the chancellor.

What would bed tax do to UK hotel prices?

South-west EnglandPropertyRack rate inc VATBed tax\* (7.5%)Total inc VATTwo-star Whipsiderry Hotel, Newquay, Cornwall £55 £3.51 £59.11Three-star Crantock Bay Hotel, Crantock, Cornwall £71 £4.53 £76.29Five-star The Horn of Plenty, Tavistock, Devon £180 £11.49 £193.49LondonTwo-star Royal Norfolk Hotel, Hyde Park £60 £3.80 £64.5Three-star Best Western Delmere Hotel, W2 £125 £7.98 £134.40Five-star One Aldwych, Covent Garden £381 £24.38 £410.52Northern EnglandTwo-star Merchants Hotel, Manchester £40 £2.55 £42.99Three-star West Lynne Hotel, Manchester £45 £2.87 £48.37Five-star Lowry Hotel, Manchester £270 £17.23 £290.27 *Prices based on a one-night stay in a standard double room. \*Tax calculated on rack rate ex-VAT.* *By Emily Manson*
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