The UK Government’s announcements on targeted VAT measures for businesses have met with a mixed reaction in Northern Ireland.
One of the sectors facing the biggest challenges, hospitality, has welcomed the move but urged the government to look at longer-term VAT reform for the industry.
Colin Neill, Chief Executive, Hospitality Ulster, said:
“Hospitality Ulster welcomes the UK Government’s recognition that targeted VAT measures can play an important role in supporting both businesses and consumers during ongoing cost pressures. The temporary reduction in VAT on eligible activities over the summer period is a clear acknowledgement that hospitality, leisure and tourism businesses remain under significant strain, while households continue to face difficult financial pressures.
“For hospitality operators across Northern Ireland, any intervention that helps drive footfall and encourages families to enjoy days out is positive news. Businesses throughout our sector have demonstrated remarkable resilience over recent years, but many continue to grapple with rising labour, food and energy costs.
“This announcement also reinforces the argument that VAT remains one of the most effective tools available to Government to stimulate economic activity, support jobs and boost consumer confidence. Hospitality Ulster has consistently called for a more competitive VAT environment for hospitality and tourism, particularly given the challenges businesses here face in competing with neighbouring markets.
“We believe this summer measure should be viewed as a starting point for wider consideration of long-term VAT reform for hospitality, helping to create sustainable growth, protect employment, and strengthen local economies right across Northern Ireland. Hospitality Ulster will continue to engage with Government to ensure the voice of Northern Ireland’s hospitality sector is heard as further economic support measures are considered.”
Meanwhile, the Northern Ireland Food to Go Association has welcomed recognition of the pressures facing businesses, while urging government to consider broader VAT reform across the wider hospitality sector.
Chief Executive Michael Henderson said:
“Any move that recognises the pressures facing businesses and seeks to support consumer spending is to be welcomed in principle. However, we will reserve full judgement on the true benefit of these proposals until clearer guidance is provided to ensure support is inclusive, fair and does not place restrictions on other parts of the hospitality and food-to-go sector.
Businesses across hospitality continue to battle rising costs, reduced consumer confidence, staffing pressures and increasing operational challenges. While targeted intervention is positive, the wider hospitality sector should also be given serious consideration for a meaningful VAT reduction.
We have consistently argued that a reduction in VAT would deliver significant support to small businesses, protect jobs, encourage investment and stimulate spending across local economies. Hopefully, this latest scheme helps elevate the wider argument for VAT reform across the entire hospitality sector and provides further evidence of the positive impact this type of intervention can bring to independent operators and small businesses who are under enormous pressure.
The food-to-go sector plays a major role in communities right across Northern Ireland, supporting thousands of jobs and contributing significantly to the local economy. What businesses now need is long-term, sustainable support that gives them confidence to grow rather than simply survive.”
But A VAT specialist with leading accountancy and advisory firm BDO Northern Ireland has described the temporary summer 5% tax rate on hospitality, leisure and culture as “great news for families but more complex for businesses than it may seem.”
From 25th June 2026, a temporary 5% VAT rate will apply to certain aspects of the hospitality, leisure and cultural sectors, running up to and including 1st September 2026, the point at which most children will be back at school and the standard 20% rate will return.
Rebekah Townsend, VAT Director at BDO Northern Ireland, commented: “The 5% rate is great news for the sector, and for families looking to make the most of the summer, but the rules are complex for businesses, and there are real commercial decisions to be made alongside the technical VAT ones.
“In a similar vein to the Eat Out to Help Out scheme during the pandemic, the risk of getting this wrong carries real consequences. There are distinctions already causing confusion, and businesses should not assume that everything they sell in the relevant sectors will automatically qualify.
“Businesses will need to make a conscious decision about whether to reduce prices, retain the benefit to support margins, or take a blended approach. That decision carries commercial, reputational and competitive implications, particularly in sectors where price transparency is high and consumers are cost-conscious.
“The issue of having till and ticketing systems ready on time will undoubtedly cause concern. Applying the wrong VAT rate, even where the intention was correct, can result in VAT errors which will then need to be corrected with HMRC. POS systems, billing software and accounting platforms all need to be configured to apply the correct rate to the correct products and services before 25th June. For businesses with complex product ranges, this is not a minor administrative task.
“Similarly, staff will face questions from customers from day one and without clear internal guidance in place before the relief opens, businesses risk inconsistent application of the rate and potentially disgruntled customers. Even attractions which are exempt from VAT, due to the cultural exemption, are likely to face questions from the public and will need to be clear on their VAT position in advance.
“All of this adds up to mean that urgent preparation by businesses is essential. Those that quickly review their eligibility, configure their systems and brief their teams, will be in a much stronger position than those who try to adapt once the relief is already live,” Rebekah Townsend said.