Budget Emergency

The new Chancellor of Exchequer, George Osborne unveiled his first ‘emergency’ budget on 22 June 2010 and there were a number of implications for the tourism sector.

The main focus of the budget has been to implement a deficit reduction plan. This intention was forecast in advance of the Budget so many of the announcements were not surprises.

The Budget has forecast that the deficit will be eliminated completely within six years. The Chancellor has committed to achieving this by cutting public spending and raising taxes through an 80:20 ratio between public spending cuts and tax rises.

VAT

There will be a rise in VAT from 17.5% to 20% in January 2011. This change could have a damaging effect on the British tourism economy by deterring foreign tourists from visiting the UK. Tourism South East and other industry bodies have argued against high rates of VAT in the past. The British Association of Leisure Parks, Piers and Attractions (BALPPA) has commissioned research that demonstrates the benefits that can be accrued from lowering VAT on tourism products. This document can be downloaded on the Tourism South East website here;

Furnished Holiday Lettings Rules

The Chancellor reiterated that the Furnished Holiday Lettings rules are to be reinstated for 2010/11. A consultation will take place in the summer to ensure that tax rules meet EU legal requirements in a fiscally responsible way by changing the eligibility thresholds and restricting the use of loss relief. Tourism South East has campaigned on this issue in the past and we will continue to represent the self-catering sector’s concerns. Read more here;

Taxes

The threshold for employers national insurance contributions will go up to help to stimulate the creation of new jobs;

An exemption on employer’s national insurance contributions will be implemented for the first ten employees of any new business. However, this will not apply to new businesses in South East of England, the East of England and London;

Corporation tax rate to go down to 27p in the pound in 2011 and will go down a further 1p each year for the next four years meaning that in 2014 the rate will be 24p;

Small business corporation tax will be cut to 20%;

HMRC will cancel back dated business rates bills to negate the implications of new rises in business rates;

Enterprise Finance Guarantee

The Enterprise Finance Guarantee scheme will be extended by increasing the fund from £500 million to £700 million and setting new target for lenders to process loans within 20 days;

Allowances

The annual investment allowance for businesses will be reduced from £100,000 a year to £25,000 a year;

Better Regulation

There will be a review of all regulation planned for the next twelve months by the Reducing Regulation Committee;

Sunset clauses are to be applied to new business regulation to ensure that new regulations are properly reviewed;

Air Passenger Duty

The government will explore changes to Air Passenger Duty from a ‘per passenger levy’ to a ‘per plane levy’;

Gift Aid

The government will explore ways to improve the Gift Aid system. This has large implications for the charitable attractions sector. Tourism South East has contributed to this consultation in the past and will continue to be involved in the future.

·  If you have any questions about the implications of the Budget please contact the development team.