As part of the Chancellor’s Spring Statement, the Treasury is calling for evidence on what impact VAT and Air Passenger Duty (APD) has on tourism in Northern Ireland and how these taxes can be used to encourage people to travel
The government is aware that there are concerns about the impact that VAT and APD have on tourism in the UK, and particularly in Northern Ireland, and wants to fully explore these issues.
EU member states often choose to apply a reduced rate of VAT to accommodation and/or other tourism related activities. However, many of those countries, including Germany, France, and Italy have also introduced specific ‘tourist taxes’ or ‘hotel taxes’ on overnight stays that are not a feature of the UK tax system.
Although the 20% standard rate of VAT applies to most tourism goods and services the Treasury argues that due to the UK having the highest VAT registration threshold in the EU many small businesses can avoid charging VAT altogether.
The power to set the APD rates on direct long-haul flights departing Northern Ireland was devolved to the Northern Ireland Assembly (NIA) and from 1 January 2013 the rates were set at £0. The government wants to understand the impact this has had on the air travel industry and tourism more generally.
In its consultation the government aims to find out whether current VAT and APD rules hinder the growth of tourism and how future changes to these taxes could help build tourism in Northern Ireland.
The consultation closes on 5 June 2018.