Hospitality industry representatives in Northern Ireland presented their case to lawmakers for a reduction in value-added tax, arguing the measure is essential for business survival amid direct competition with establishments across the border in the Republic of Ireland.
The industry currently faces a significant disadvantage due to differing VAT rates between the two jurisdictions. In the Republic, hospitality VAT on food is set at 9% and 13.5% on accommodation, while Northern Ireland applies the standard UK rate of 20% to all hospitality services. Industry leaders, including Michael Cadden of Hospitality Ulster and Selina Horshi of White Horse Hotel in Londonderry, highlighted that this disparity has become increasingly difficult to manage as other operational expenses have risen substantially. They cited increases in the National Living Wage, National Insurance contributions, and supply chain costs as factors that have compounded the impact of the VAT differential.
Crucially, the industry representatives acknowledged that a VAT reduction would not be passed through to consumers as lower prices. Instead, they framed the cut as necessary relief for squeezed profit margins that would enable businesses to remain competitive with cross-border competitors, particularly in attracting tour operators and large group bookings. Horshi explained that the additional VAT burden translates to thousands of pounds annually per business and affects her ability to offer competitive rates to tourism operators.
The UK government has consistently opposed the hospitality VAT cut proposal, contending that such a measure would be poorly targeted and financially unjustifiable. However, evidence from the Republic of Ireland’s experience with temporary VAT reductions was presented to support the industry’s position. Adrian Cummins, chief executive of the Restaurants Association of Ireland, noted that lower VAT rates had helped protect businesses and jobs in that jurisdiction.
Gareth Hetherington of Ulster University’s Economic Policy Centre suggested a pilot scheme could be warranted, though any evaluation would require four to five years of operation. He estimated the initial annual cost to the UK Treasury at approximately £225m to £250m.
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