Value Added Tax (VAT) has been set at 20% for nearly five years and is having a negative impact on tourism in the UK, especially when compared to other cities in Europe. With changes to VAT currently at a standstill, what can be done to help businesses who are struggling with the high VAT rate?
Earlier in the year, the Office for National Statistics (ONS) announced that the current UK trade deficit stood at £13.3billion a year and the most viable solution to drop the standard 20% VAT by 5%. Upon speaking to several clients, it became apparent that the UK’s high VAT rate was hindering their growth and making their business appear less attractive to other European businesses with lower VAT rates. Further reading and research supported this notion that my clients have. According to the Cut Tourism VAT campaign, the UK is currently ranked 140 out of 141 countries that are priced competitively, thus making it less attractive for domestic and foreign tourists to want to vacate in the UK. With 80% of SMEs accounting for hospitality and tourism based businesses, a reduction in VAT would be the most optimal option. However, no plans to change the VAT rate which means SMEs should be aware of other areas and resources that could boost their business. These include:
Tax Reliefs and Benefits
The government has introduced a range of tax reliefs, schemes and incentives in order to help SMEs save on tax and to promote survival. For SMEs operating in the hospitality and tourism space, there are many reliefs available. These include reduced business rates, employee allowances and more commonly, allowable expenditure. Our Top Ten Tax Tips for Hospitality, Restaurants and Pubs can guide you further on reliefs available to you.
Your pricing structure can massively impact the amount of people you attract to your business. When reviewing your prices, the most logical thing to do is speak to an accountant. It is important to estimate how much you can afford to make – or lose – if you decide to make a change. Creating financial forecasts, reports and scenarios with your accountant is the quickest and most logical method when reviewing your pricing. You may find that you may be under-pricing or have the wrong pricing structure. Our article on pricing for success can help guide you with pricing your business.
Supply Chain and Technology
An ineffective supply chain model – or no supply chain model – can quickly increase your costs and make your business run less efficiently. Changes in the supply chain process can make it a lot easier for businesses to streamline their process and reduce costs significantly. One of easiest ways businesses are doing this is through technology. Using technology can help you with reporting and invoicing, inventory management and Point-of-Sale.
Marketing is an effective tool for hospitality, tourism and food based businesses. Not only does it open you up to thousands of potential clients that you usually would not have access to, but it also gives you the opportunity to target offers and promotions specifically to customers and potential customers.
Reviewing your cost structure can be a time consuming task. If you would like to find out more information, please contact me directly at Adam at firstname.lastname@example.org.