The warning comes from Chartered Accountants Francis Clark with Winter Rule whose hotels team specialises in helping hospitality businesses make the most of available tax reliefs.
At present hotels and guest houses qualify for 100% tax relief on plant and equipment investment up to £100,000. But from April 2012 this will be capped at £25,000 expenditure and the relief will drop to just 18% per year.
Tom Roach, tourism team leader in Francis Clark’s Truro office where the firm recently merged with Winter Rule, said: “We have been surveying Cornwall’s accommodation sector for 20 years and what we’ve found over the last 12 months is that those businesses that have invested in their product have done better than those that haven’t.
“But the tax reliefs available to them will be significantly reduced next year, so our message is those businesses that can afford to invest should do so before April.”
Mr Roach said Francis Clark’s monthly survey of 25 hotels across Cornwall covering 800,000 bed nights a year pointed to a modest 1% decrease in visitor numbers in the year to September.
He said discretionary spending, although marginally up over the last few years, was failing to keep pace with inflation and consumers were looking for bargains, which meant overall profitability was down. But those able to invest were reaping the benefits and not experiencing such pressures.
That view was endorsed by Stephen Baker at the Carbis Bay Hotel in St Ives which recently unveiled the first phase of a major £3 million investment programme: “We are investing and improving our facilities to offer visitors the high calibre of accommodation they expect from Cornwall which has now become an iconic destination and this is already paying dividends with increased website traffic and visitor spend to both the corporate and leisure side of the business.”
Mr Roach added that Francis Clark was backing recent calls by the South West tourism industry – including celebrity chef Rick Stein – for a targeted VAT cut for tourism: “Irish hotels have seen their VAT rate cut to 13.5% and France has had a reduced rate of 5.5% since 2009. We would certainly welcome a reduction but it would need to be of significant proportions to provide major stimulus to the region’s tourist market.
“Failing that then we think MPs should take fresh look at whether investment in capital projects in the tourism industry could be rewarded more through the tax system rather than being reduced from next April.”
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