Business / Cautious welcome for tourism VAT cut proposal

The St Ninian's Isle tombolo beach, one of Shetland's many beauty spots.

A PROPOSAL to reduce VAT on domestic tourism from 20 per cent to five per cent has been broadly welcomed by the local sector, though it would only benefit the larger, VAT-registered businesses.

The idea was floated by Scottish Lib Dem deputy leader and Northern Isles MP Alistair Carmichael who said the cut would be part of a “radical plan” to save the tourism industry which has been paralysed by the Covid-19 pandemic.

“Scottish Liberal Democrats believe that our vital tourism businesses deserve a bold VAT cut – as a sensible investment to ensure future success,” Carmichael said.

“The chancellor should make this reduction as part of a comprehensive package of measures to tackle the growing economic crisis.

“Alongside a targeted extension of the Coronavirus Job Retention Scheme specifically for those unable to reopen, this VAT cut would give tourism and hospitality a crucial boost.”

Emma Miller of the Shetland Tourism Association (STA) said any assistance given to the sector would be welcome.


However, she added that she struggled to see how the proposal would help the association’s many smaller members such as B&Bs and tour guides.

Miller said she was interested to learn more about the other elements of the plan, as some tourism businesses would only be able to survive until next summer if the furlough scheme was extended.

“I think any assistance that can help tourism businesses recover would be very welcome. I would be interested to see further details of how a VAT reduction would apply to only one industry sector,” she said.

“I know that the Scottish Government are putting pressure on Westminster to extend the furlough scheme for the tourism industry to help it recover. I’m hopeful that the initial refusal of that might be reconsidered.

“For some businesses I think it might be the only way they will survive through to next year. We are still waiting on guidance for some services and the 2m versus 1m issue is also going to be critical.”

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Grant O’Neil of Busta House Hotel said he was “fully supportive” of the proposal, adding that “everything that can be done for this industry needs to be done”.

Like most hotels and guesthouses in Shetland the hotel overlooking Busta Voe had to close at the end of March and furlough most of its staff.

It kept going by providing take away meals for the community during the last three months but it is now eagerly waiting being able to open up a little bit more once outside dining is permitted, possibly in early to mid July.

The hospitality and UK tourism industries are among the hardest hit by the necessary social distancing policies in place.


Reports indicate that 80 per cent of workers in the hotel and food industries are furloughed and up to a third may be at risk of losing their jobs in the long-term.

Carmichael said: “The seasonal nature of tourism means that many businesses will not have the income to avoid closing down after the support packages end.

“With most of the summer already gone and many people still anxious about travel, these businesses face the prospect of ‘three winters in a row’”.

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