Hotel not passing VAT rate reduction on

[billysboy]

I have a weeks holiday in Southwold booked that was booked earlier in the year

The hotel recently contacted me for card for a deposit which was fine
I asked them to confirm the room rate which they did
the same week the VAT was reduced from 20% to 5%

I left it a week or so and called them to ask if there had been any adjustments as a result to be told yes but they had increased their prices

I was told that the hotel had put their prices up as per terms and conditions small print and that they were taking the VAT off the new increased rate

So my original booking was £2300 wahich after their Vat " discount " went to £2200

I am aware we are in the middle of a crisis however Adnams are a huge company ,
I already understood that with a reduced menu , social distancing etc this would not be the same experience as the previous year ,however I thought I could live with this

AIBU here or are they taking the piss

Its left a nasty taste in my mouth

No they are not taking the piss. Their costs have gone up massively. They've been shut for months and now cant book to full occupancy as have to have more hours between guests to quarantine rooms and extra cleaning. They will have no business travel bookings and lots of cancellations.

The VAT reduction is for business to get back some money they lost. Not for customers.

The fact that some companies don't need it and pass the savings on doesn't mean everyone can or will.

The VAT reduction was specifically done to benefit the businesses, not the consumer.

The VAT reduction is for the benefit of the hotel industry, not the consumer.

And please, whoever is reading this. Don't be dicks about it. We had small independents being abused because they didn't pass on reduction which wasn't even meant for customers.
People were coming with "Maccies and KFC did you dicks! You don't care about us, will boycott you"
It's very clear who is a dick in these scenarios. Not the small businesses.

The vat reduction is for the benefit of the tourism industry, not for customers.

You were willing to pay £2300 and you're now paying £2200.

I'm not seeing the problem here.

@MaskingForIt

The VAT reduction is for the benefit of the hotel industry, not the consumer.

I don't quite understand that. VAT is applied to the Ex.VAT price. If a booking is £100, the price after VAT is £120. The hotelier then simply passes that £20 on to the Government. If VAT goes down, they pass on £5 instead. So VAT wasn't to save money for the industry, it was to stimulate the market by consumers seeing lower prices and booking when they might otherwise not have done.

Exactly the VAT reduction is for the business, not the customers.

Are they a huge company like Frankie & Bennies, Zizzi's, Ask, Pizza Express all of which have had to close restaurants all over the country recently due to losses, administration or risk of administration. VAT reduction is to prevent this and even more job losses, not to make our stay/meal cheaper.

I work in a similar industry (events) and we have done the same.

Unfortunately costs have massively increased while capacity has decreased.

There are a huge amount of regulations that we now have to comply with, all of which have increased costs.

And it’s not just the PPE for staff and hand sanitiser for guests, it’s moving back to disposable cups, cutlery, condiments, hygiene wrapping glasses, washing linens at 60 degrees, quarantining items that can’t be washed at 60 degrees for 72 hours. Enhanced cleaning schedules. Staff training. Servicing buffets instead of letting you help yourself. Plexiglass screens. The list is exhausting.

I can’t even re-use flipchat pens and paper anymore for meetings, I have to throw them away in order to be COVID Secure.

Likewise, many hotels have to run at high occupancy in order to be profitable. One hotel near me has to run at 90% occupancy to be profitable.

I imagine most of the industry will do this.

I thought the vat cut was to encourage more people to stay away in Hotels etc

Further explanation - the prices stay the same, as we do not usually see the VAT breakdown on the menu/booking information, the business is able to keep the 15% difference.

my understanding it that it is to support the industry, and it is for the individual business to decide whether to pass the saving on - and thus generate more business through lower prices, or use the 'saving' to reduce the impact of higher operating costs.
As an accountant, the impact of reducing prices, adjusting accounting systems for a short period is a soul destroying nightmare in itself - vague memories of it in 2008 I think - thankfully don;t have to deal with it now.

I was hoping for a reduction on annual cinema membership, but hasn't happened.

But you were staying there anyway - you said you’d booked it earlier this year.
You’re saving £100.
Just go and enjoy your holiday.

The statement Sunak gave in the House a couple of weeks ago was very much that the VAT reduction was an incentive to encourage the consumer to go out and spend. That's also how the papers were covering it in the run up. As said above, businesses are just a collection service for VAT, transferring it from the consumer to the Treasury, so the language around 'passing it on' isn't quite what's happening, as it was never a tax on businesses.

@DeathMetalMum Just because we don't see it, doesn't mean it isn't there. I have no problem with businesses putting up their prices to compensate for the change in procedures the pandemic brings, but I still think they should be passing on the VAT reduction. Certainly, the bill will show VAT at 5%. So they just need to be clearer that they are increasing their prices, but VAT has gone down.

I own a business. Covid has been a complete disaster. I am going to have to increase my prices just to try and stay trading. A lot of businesses are in a similar boat. Yabu especially as you are getting a small saving.

@billysboy

I thought the vat cut was to encourage more people to stay away in Hotels etc

The majority of people who would have gone abroad on holiday will now be looking for breaks here, it wasn’t to encourage that it’s to help out business who have lots thousands and could go under. I think it was very generous of them to pass part of that benefit on to you!

They can either cut prices to stimulate demand, or where price increases would have been necessary, avoid or reduce them

There was a government body (possibly Matt Hancock) on the news last week saying that if they can pass it on to the customer, that's great, but if the business needs it that's fine too.

VAT reduction can benefit businesses in two ways. It could be passed on to give consumers a reduction and drive sales, or it could be used to allow businesses to increase their ex-VAT price while leaving the consumer price the same.

The former works well for businesses that can increase sales but not for e.g. hotels which have a fixed capacity. For them to benefit at all, they need to do exactly what they have done. YABU.

agree with everyone else - it's for the business to save and save jobs - not for the consumer that has probably (not all) saved tons since March and has boosted their savings - to save even more. I count myself as one of these consumers and I get the VAT cut is not for me.

So if something cost me £100 before, £83.33 went to the business and £16.67 was VAT NOW the same thing costs me £100 but £95.23 goes to the business and £4.77 goes to the GOV as VAT.
Hopefully it will help these business survive. Less money for the GOV of course though.

If businesses have done ok since March , they may decide to cut their prices giving them a competitive advantage - up to them

ok it would appear i ABU

A friend of mine was talking about this in the week. She is saying that it was definitely sold by the government as a way for companies to lower prices and therefore stimulate more business. Think that’s why some people feel aggrieved.

@bridgetreilly

VAT reduction can benefit businesses in two ways. It could be passed on to give consumers a reduction and drive sales, or it could be used to allow businesses to increase their ex-VAT price while leaving the consumer price the same.

The former works well for businesses that can increase sales but not for e.g. hotels which have a fixed capacity. For them to benefit at all, they need to do exactly what they have done. YABU.

Exactly. For example restaurants which now have much smaller capacity wouldn't benefit from driving sales up. They need the cash now to cover PPE and lost spaces.