UK hospitality VAT rate cut

Old Sep 27, 20, 3:37 pm
  #1  
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UK hospitality VAT rate cut

I wasnít aware until recently that UK hotels have been given a VAT rate cut through January 2021. Now many are touting the 25% Welcome back rate, but this was a rate introduced before the 15th of July when the VAT rate was cut. I havenít seen any change in rates i.e a 15% cut at any Marriott. As I am a government employee and my husband is over 62 I know the rates for these quite well and they are no cheaper. More expensive in some cases.
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Old Sep 27, 20, 3:42 pm
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Back again. It seems they can keep the rate cut for themselves. So true to form that is what they Marriott hotels are doing
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Old Sep 27, 20, 5:31 pm
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Fairly common practice across the industry. Hardly confined to Marriott. In many instances, it is all that keeps the hotel in business.
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Old Sep 27, 20, 7:59 pm
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You are saving the tax. VAT is added on top of rate.
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Old Sep 27, 20, 8:30 pm
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Originally Posted by stuartpig View Post
It seems they can keep the rate cut for themselves.
I'm not an expert in UK law, but I would think hotels are free to set rates as they please, based on market conditions.
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Old Sep 28, 20, 1:16 am
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Consistent across most hotel chains this year in the UK. Most hotels have been keeping the customer price the same, with the tax reduction allowing them to make a little bit more. Considering lower occupancy and in some cases, additional costs, it isn’t a surprise.

I did see a few IHG and Hilton family hotels drop in line with VAT back when it was introduced. Marriott properties in the UK seem to be trying to maintain a higher price point generally, whereas a number of competitive chain hotels have been lowering rates to stimulate demand. Demands on the city etc, but certainly true in some UK areas.
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Old Sep 28, 20, 1:20 am
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Originally Posted by hotelboy View Post
You are saving the tax. VAT is added on top of rate.
Not how it works in the UK. Hotels have to be priced inclusive of tax. A £100 room pre the VAT cut and a £100 room after the VAT cut still sees the customer pay £100. The amount of VAT is lower though, so the hotel is making more money for the room, whilst the customer pays exactly the same.
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Old Sep 28, 20, 1:23 am
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This is one of the few downsides to tax inclusive pricing, commonly practiced (or legally required) throughout most countries in Europe: if taxes are lowered the merchant can stick to the previous publicly posted all-inclusive price and keep the difference to himself.
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Last edited by MePlatPremier; Sep 28, 20 at 1:56 am
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Old Sep 28, 20, 1:47 am
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Essentially the hotels are keeping the extra money. If you had made a booking prior to the rate cut you would be entitled to the lower rate as you booked a rate that included 20% vat but anything you booked after the hotel is charging more for the room and they are entitled to charge whatever they wish for this. Perfectly normal practice although I would say that Marriott properties in London seem to have higher rates than more comparable brands at the moment.
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Old Sep 28, 20, 5:09 am
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Originally Posted by stuartpig View Post
It seems they can keep the rate cut for themselves. So true to form that is what they Marriott hotels are doing
From the UK Government website :
On 8 July 2020, the government announced that it would introduce a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions.

This cut in the VAT rate from the standard rate of 20% will have effect from 15 July 2020 to 12 January 2021.

These changes are being brought in as an urgent response to the coronavirus (COVID-19) pandemic to support businesses severely affected by forced closures and social distancing measures.
The prime reason for the cut in VAT is to support the hospitality business by reducing the tax bill, and not necessarily to lower prices for the customer.

Previously, if a customer paid £100 for a room, that's a net revenue rate of £83.33 plus VAT (tax) @20% of £16.67
Now the net revenue rate is £95.24 plus VAT (tax) @5% of £4.76

If the hotel chose to pass on the whole of this benefit to the customer, then the revenue-neutral rate would be £83.33 plus VAT (tax) @5% of £4.17, so the customer would pay £87.50
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Old Sep 28, 20, 5:11 am
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You should get some more base points compared to before the VAT cut, i.e if you pay the same tax incl. rate but VAT is reduced you paying a higher room rate.
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Old Sep 28, 20, 5:23 am
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Originally Posted by UKTraveller4Fun View Post
If you had made a booking prior to the rate cut you would be entitled to the lower rate as you booked a rate that included 20% vat
That's not the case. Businesses do NOT have to pass on the VAT cut, and the customer does not have the right to a discount or refund for bookings made before the rate cut.
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Old Sep 28, 20, 6:01 am
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Originally Posted by Oxon Flyer View Post
That's not the case. Businesses do NOT have to pass on the VAT cut, and the customer does not have the right to a discount or refund for bookings made before the rate cut.
Interesting, I knew if you had already paid then you may not be able to get the discount, but on rates booked but not prepaid I assumed you would but possibly this is because of a lot of rates I am quoted are before vat and thus it is passed on this way. My only experience with a stay booked before the announcement but then commenced afterwards with Marriott was they did indeed lower the room rate to reflect the vat change.

So unless you have been quoted something excluding VAT or your confirmation shows that the amount will be altered if the VAT rate is changed (but must not simply state your liable if it increases) then it is simply down to the hotel and I stand corrected.
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Old Sep 28, 20, 6:18 am
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Originally Posted by stuartpig View Post
Back again. It seems they can keep the rate cut for themselves.
Indeed, that was the entire point of the rate cut.
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Old Sep 28, 20, 6:19 am
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Originally Posted by MePlatPremier View Post
This is one of the few downsides to tax inclusive pricing, commonly practiced (or legally required) throughout most countries in Europe: if taxes are lowered the merchant can stick to the previous publicly posted all-inclusive price and keep the difference to himself.
Not really. This is why there was a rate cut.
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