THE Scottish Government has thrown its weight behind calls to slash value-added tax in the tourism and hospitality sector.

Richard Lochhead, minister for small business, innovation, tourism, and trade, has written to the UK Government urging it to consider cutting the tax as the industry grapples with tough trading conditions.

It adds weight to calls which have been mounting in the sector for Chancellor of the Exchequer Jeremy Hunt to reduce the burden of VAT in his Autumn Statement on Wednesday.

The Westminster Government previously cut VAT for the industry at the depths of the pandemic, reducing it to 5% during lockdown in 2020 before gradually returning its standard level of 20% in April last year. Power over VAT is reserved to Westminster.

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In a letter to Sir John Whittingdale, minister of state for media, tourism and creative industries, Kevin Hollinrake, parliamentary under secretary of state minister – minister for enterprise, markets and small business, Mr Lochhead calls for VAT to be decreased once again to support a “vitally important” Scottish industry.

“Trading conditions remain very challenging, and this is compounded by ongoing economic issues impacting negatively on operating costs and disposable income in household budgets, as well as challenges in the recruitment and retention of staff across all skills disciplines,” Mr Lochhead writes.

“Recent surveys conducted by industry groups, including the Scottish Tourism Alliance, consistently report these pressures as being of greatest concern to businesses.

“I am committed to do all that is possible to help the sector within the Scottish Government’s increasingly constrained resources, but I would like to raise with you the issue of VAT, which is of course reserved and upon which only the UK Government can take action on at this time.

“During the pandemic the tourism and hospitality sector benefited from reduced levels of VAT, 5% then 12.5%, before returning to the standard 20% rate in April last year. The industry continues to make a strong case for the return of a reduced rate of VAT for the sector.

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“Many countries, particularly across Europe but also elsewhere, maintain reduced rates of VAT for tourism and hospitality. I believe the UK Government could support tourism and hospitality by looking again at a reduced rate of VAT for the sector here, and I ask you to support this and make the case for it to your ministerial colleagues, particularly ahead of the autumn budget statement on 22 November.

“This could help boost business viability in a challenging trading climate.

“The cost to the Exchequer of a VAT cut could be partly mitigated by stimulating demand in the sector.”