Each year every tourism business has to complete a tax return, to allow HMRC know how much profit it has made, and how much tax is due.
With COVID, we know that the back end of the tax year 2019-2020 March was virtually a write off, and since the beginning of the 2020-2021 tax year, trade has almost been non-existent.
Since COVID the UK Government has generously seen fit to support British businesses by furloughing staff at a rate of 80% of their gross pay. Although wage costs are a vast amount of the tourism trade’s costs, the premises costs are also sinking our existing tourism businesses.
But how do we help them, when there are so many restrictions on COVID induced health and safety which makes almost all tourism venues not only unprofitable but barely able to break even?
One suggestion might be to make tax return completion every 6 months whilst COVID is among us. Additionally, to make the losses available to previous year profits, therefore producing tax refunds. All that is happening is that we are speeding up the tax return process, in order to keep these businesses with additional cash to see them through. In order to allow 6 months’ tax returns and carry back losses it must be included in the Budget to make it law.
How would bi-annual tax returns help?
Assuming the businesses in question have lost profits during this period, it would then allow them to claim back from previous years’ tax bills paid. This would introduce cashflow into the business, keeping them afloat until it is possible to put a better plan in place to deal with the new COVID situation, or to carry them through until a vaccine/drug is found that would help fight the pandemic.
What other support would they need?
A more inclusive transport system, which would help replace the loss of the bus holiday companies which have has seen the biggest players in the market fail with the disappearance of their customers.
Instead of buses and coaches, organise the trains and taxis to make up some of the gap. Develop the holiday train.
Also required are the marketeers who are desperately needed to steer campaigns, such as in my area of North Wales, and to assist companies to deliver what the customers actually want in a holiday now. It’s clear that the UK population are not happy to return to normal, and are clearly scared of a second wave of the virus. So, marketeers need to identify what kind of holiday the anxious traveller would like.
How would this benefit the Government?
As it is now, the government have a problem of paying tax refunds out now (and saving businesses, who then be able to recover and pay taxes again) or wait until the business has to deliver a tax return in the normal way, and gain their tax refund later, when it’s probably too late to save the business. How can the government make up lost taxes, by increasing the goods sold in those markets, e.g. more VAT on a pint of beer? I am sure the customers would be willing to pay to help the tourism and hospitality market if that meant they were also helping to save that market. This would contribute to the loss in tax revenue due to the increase in tax refunds, but it would decrease the severity of the recession and the need to go back to what would be super austerity.
* Katherine Lewis is the Treasurer of Aberconwy Lib Dems and has stood for Conwy Town Council in the past
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One Comment
Katherine,
under the HMRC making tax digital program small businesses will make quarterly reports of their profit or loss just as they do with their VAT returns now. So early claims for business loss relief, of the kind you envisage, should be technically feasible even without changing the annual tax return process.
At present VAT payments due for the period up to 30 June can be deferred until 31 March 2021. Additionally, most Tourism businesses will be able to benefit from business rates holiday for a year, direct grants for smaller businesses and coronavirus business interruption loans 100% guaranteed by the government for loans up to £50,000 and 80% guaranteed for larger loans up to £5 million. With wage support in place for furloughed workers, I think the problem for many tourism businesses will be rent.
Alter is a member of the Coalition for Economic Justice The CEJ is developing a proposal for a scheme of rent support that will be published shortly:
Broadly, the Bank of England under its quantitative easing program would offer to buy land from landlords, leaving them with a long lease to operate in return for an annual payment on the rental value of the land. The Bank would offer a year’s holiday on the payment of the annual rent, as long as the erstwhile landowner passed on this rent holiday to their tenants. Owner-occupiers could be given the same opportunity to sell their land to the Bank and receive an interest-free injection of capital into their business. The scheme could provide a cash injection to landlords and owner-occupiers to sustain their businesses. Tenants would enjoy a twelve-month rent reduction and a new source of public revenue would be created.