UKHospitality support for online sales tax to support high street recovery

Trade body says businesses that deliver services in person from properties like hotels and food delivery should be exempt

Hotel bookings must be exempt from a planned online sales tax the UK government is consulting on, according to a trade body that represents the hospitality sector.

In its response to the consultation, UKHospitality has called for due consideration given to “property based industries such as hospitality”.

This would see hotels sales made online direct with operators exempt from the tax, although OTA bookings would be liable because services are not delivered from properties.

UKHospitality says proceeds from the tax should be used to reduce high street business rates which it claims are “one of the biggest barriers to recovery for operators looking to rebuild following the pandemic”.

The body argues the current system results in the hospitality industry overpaying by £2.4 billion each year, equating to an overpayment of 300% relative to its turnover.

“An online sales tax must involve exemptions for services that are ordered online but involve delivery from a physical presence that delivers that service in person, for example hotel bookings and restaurant deliveries, so as to avoid a stealth ‘double-taxation’,” the body said.

UKHospitality called for the online tax to be based on revenue through relevant online and that the system is designed with an allowance below which no tax is levied. 

It also demanded rates reductions to be achieved via a reduced multiplier for all relevant businesses and not focused solely on smaller businesses, as done through the Small Business Rate Relief.

Kate Nicholls, UKHospitality chief executive, said: “We are calling for an online sales tax to be introduced in the UK to cut business rates for high-street venues and deliver economic regeneration across the UK. 

“The basis for an online sales tax must not stifle innovation and the development of online business models but must support our British high streets. 

“This is why government must ensure that an online sales tax avoids double taxation for businesses that deliver product on-premise, such as pubs, restaurants and hotels.

“The taxation system has lagged way behind the changes to the modern economy and while we have long known that business rates is arcane and outdated, there is also an absence of an equitable system of justifiably bringing the digital economy into taxation.”