In this edition’s eNews, we look at calls from UK Hospitality for the Prime Minister to abandon plans for a nationwide tourist tax, HMRC’s updated guidance on the temporary reduced 5% VAT rate for children’s meals and family attractions, and signs of improvement in the jobs market as permanent staff recruitment stabilises for the first time in almost four years. We also cover pressure on the government to reverse Inheritance Tax changes affecting farms and family businesses, the latest rise in UK inflation driven by higher energy costs, and official figures showing the UK economy grew by 0.4% between April and June despite ongoing business cost pressures.
- Trade body calls for Prime Minister to drop tourist tax plans
- HMRC updates guidance on reduced VAT rate for summer holidays
- Recruitment of permanent staff stops falling for first time in four years
- Prime Minister urged to reverse IHT changes at Autumn Budget
- UK inflation increases to highest rate in four months
- Data shows UK economy grew between April and June
Trade body calls for Prime Minister to drop tourist tax plans
Trade body UK Hospitality has urged Prime Minister Andy Burnham to shelve plans to expand the so-called ‘tourist tax’ across the UK.
UK Hospitality has written to the Prime Minister urging him to drop the plans or face losing 33,000 jobs in the UK’s tourism sector.
First proposed under Keir Starmer’s government, the Visitor Levy would give regional mayors the power to impose a tax on tourists, chargeable on overnight accommodation.
Some of the UK’s biggest hospitality providers have opposed the levy, including Whitbread, Greene King and Butlins.
Government plans indicate that funds raised via the levy will be used to finance local infrastructure projects. It stated: ‘Local leaders know what it will take to drive growth in their areas, creating jobs and attracting investment that speak to the strengths of their region.’
However, UK Hospitality has warned that the levy will hit holidaymakers with over £1 billion in tax.
Allen Simpson, Chief Executive of UK Hospitality, said: ‘It’s clear the government is now intending to implement a nationwide holiday tax, making family holidays more expensive during a cost-of-living crisis. I am pro-devolution, but I am not in favour of an extra tax that will cost 33,000 jobs.’
Press release: UK Hospitality
HMRC updates guidance on reduced VAT rate for summer holidays
HMRC has updated its guidance on the temporary reduced rate of VAT applicable to children’s meals, family attractions and tickets.
Between 25 June and 1 September 2026, the rate of VAT on children’s meals and specific attractions is reduced from 20% to 5%.
The new guidance, issued on 27 July, includes additional details on party packages, prepayments and mixed supplies.
The latest guidance also confirms that users of the flat rate scheme should continue to apply their current percentage to calculate their VAT liability, and that the temporary reduced rate doesn’t apply to margin scheme supplies under the tour operator’s margin scheme.
Ed Saltmarsh, Tax Technical Manager at the Institute of Chartered Accountants in England and Wales (ICAEW), said: ‘We highlighted the challenges facing businesses in dealing with the temporary VAT cut, from having to update materials, processes and systems at short notice to dealing with boundary issues, when it was first announced.
‘The fact that HMRC has had to update its guidance one month after the policy took effect highlights the complexity of this measure.’
Press release: ICAEW
HMRC guidance: Revenue and Customs Brief 5
Recruitment of permanent staff stops falling for first time in four years
Analysis carried out by the Recruitment and Employment Confederation (REC) has revealed that recruitment of permanent staff stopped falling in July for the first time in almost four years.
The Confederation’s latest survey showed that the index of permanent staff placements reached 50 – this figure separates growth from contraction. Since 2022, it had been below this level.
Commenting on the figure, Maxine Bligh, Chief Membership and Innovation Officer at the REC, said: ‘Rays of light are beginning to break through for the job market as employers revive hiring plans.
‘Remarkably, this is the first month without a decline in permanent placements since Liz Truss resigned as Prime Minister in 2022, underlining just how prolonged the downturn in permanent hiring has been.’
According to the survey, vacancies rose to 47.1, which represents the highest reading since September 2024. Part-time role vacancies also increased at their fastest pace since August 2023.
Press release: Recruitment & Employment Confederation
Prime Minister urged to reverse IHT changes at Autumn Budget
Prime Minister Andy Burnham has been urged to reverse changes to Inheritance Tax (IHT) at the upcoming Autumn Budget.
Farmers from around the UK have called on Mr Burnham to honour his pre-election pledge to ‘look again’ at the changes to Agricultural Property Relief (APR) and Business Property Relief (BPR).
Prior to the Makerfield by-election, Mr Burnham acknowledged worries regarding IHT changes and pledged to revisit the matter if he became Prime Minister.
From 6 April 2026, the government implemented a £2.5 million cap per person on 100% relief for APR and BPR. Originally, the reforms were proposed with a £1 million threshold, but this was increased to £2.5 million following pressure from the farming community and business groups.
The Ulster Farmers’ Union (UFU) stated that the government ‘has more work to do’ to rebuild trust with the farming community.
Press release: Farming UK
UK inflation increases to highest rate in four months
The UK rate of inflation has risen to 2.9% – its highest level in four months.
The rise was driven by higher energy costs, according to the data published by the Office for National Statistics (ONS).
Following regulator Ofgem’s price cap increase, energy bills rose on 1 July, adding £221 a year to a household’s bill.
Chancellor John Healey stated that the war in Iran is also affecting prices, but stressed that the UK economy is resilient.
Some prices, however, have slowed: food inflation is at 1.3% – its lowest for almost five years.
Responding to the latest figures, Caterina Batog, Research and Economics Analyst at the British Chambers of Commerce (BCC), said: ‘Firms continued to feel the heat from inflation last month, with CPI rising to 2.9%, further fuelling the cost of doing business crisis.
‘Higher household energy bills fuelled by the Middle East crisis played a significant part in July’s CPI rise, and as the Bank of England has warned, energy is likely to push up inflation further in the coming months.’
Press release: British Chambers of Commerce
Data shows UK economy grew between April and June
The UK economy grew by 0.4% between April and June, official data has revealed.
The Office for National Statistics (ONS) found that the summer sunshine and sports fixtures helped the economy grow.
The ONS stated that growth has ‘remained fairly robust’. The services sector and manufacturing propelled growth in the second quarter.
According to the ONS, the economy is currently 1.2% bigger than a year ago.
Responding to the data, Stuart Morrison, Research Manager at the British Chambers of Commerce (BCC), said: ‘Faced with global headwinds from the Iran conflict, the UK economy showed welcome resilience in Q2, growing by 0.4%, according to [the] first estimate.
‘The service sector performed particularly robustly, alongside a welcome return to growth in construction.
‘But the headline figures shouldn’t disguise the cocktail of cost pressures choking long-term business growth.’
Press release: British Chambers of Commerce
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.