Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what recent assessment her Department has made of the potential impact of (a) business rates and (b) VAT on the financial sustainability of hotels in (i) rural areas and (ii) West Dorset constituency.

The Government recognises the significant contribution made by hospitality and tourism businesses, including those in rural areas, to economic growth and social life in the UK.

To deliver our manifesto pledge, from 2026/27, we intend to introduce permanently lower tax rates for retail, hospitality, and leisure (RHL) properties, including hotels, with rateable values below £500,000. This permanent tax cut will ensure that they benefit from much-needed certainty and support.

Ahead of these new multipliers being introduced, the Government recognises that businesses will need support in 2025/26. As such, we prevented the current RHL relief from ending in April 2025, extending it for one year at 40 per cent up to a cash cap of £110,000 per business, and we froze the small business multiplier.

When the new, permanently lower tax rates are set at Budget 2025, the Treasury intends to publish analysis of the effects of the new multiplier arrangements.

VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. The UK’s VAT rate of 20 per cent is close to the OECD average of 19.3 per cent. The UK has a higher VAT registration threshold than any EU country and the joint highest in the OECD, at £90,000. This keeps the majority of businesses out of the VAT regime altogether.