Sarah Halsted

Written by: Sarah Halsted and Philip Munn

Sarah Halsted

Technical Associate Director

Coronavirus - travel and leisure sector seeks VAT support

Operators in the travel and leisure sector are beginning to find themselves at the sharp end of the escalating coronavirus crisis. Although the government is not yet recommending cancellation of mass gatherings here in the UK, the industry is already noticing a drop off in trade as customers decide to stay at home rather than congregate in public areas. 

A reduced footfall in town centres is affecting the takings of bars and restaurants, promoters are noting a higher level of no-shows at ticketed events, and hotel bookings for the normally busy Easter period are currently much lower than expected. Some large events, such as The Photography Show at the NEC in Birmingham, have been cancelled by the organisers as a precaution.

These factors are beginning to have an impact on cash flow for travel and leisure businesses, many of whom were already suffering from a dip in trade due to the wet weather over the winter months, and the industry is now lobbying HMRC to offer tax concessions to help them through these difficult times.

Although with indirect taxes such as VAT, the business has often already received VAT-inclusive payments from the customer, HMRC has in recent years shown that it is still prepared to offer VAT easements for those affected by exceptional conditions. Since the Business Payment Support Service was set up in 2008 to help businesses struggling in the financial crisis, HMRC has also offered specific assistance to those trading in areas hit by floods or storm damage.

HMRC has not yet announced any specific VAT concessions related to the coronavirus, but the sector is hopeful that measures may be announced in this week’s Budget, for example HMRC may allow operators additional time to pay quarterly VAT bills and/or the waiving of surcharges for traders who have been unable to submit their VAT return on time.

With the prospect of a prolonged period of falling sales for the travel and leisure industries, immediate government support by way of VAT easements would help enormously. However, the Government’s recent time-to-pay support for Flybe – and the company’s eventual collapse – may give it pause for thought.

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