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Inverness B&Bs have been forced to shut over winter due to a low VAT threshold and rising costs





B&Bs have been forced to shut during the winter season. Picture: James Mackenzie.
B&Bs have been forced to shut during the winter season. Picture: James Mackenzie.

B&Bs across the region have been forced to shut over the winter due to rising inflation, with the current VAT Threshold being cited as the main reason for the closures.

The current threshold is set at £85,000 – which has been in place since 2017 – would mean that hospitality providers would have to pay 20 per cent to HMRC as soon as they hit £85,001in turnover. This would require Highland B&Bs to make a large proportion over this threshold in order to make any profit.

According to Inverness B&B Association, only two of its establishments have remained open over the winter months, with the rest choosing to close.

A spokesperson for the organisation said: “The current rise in utilities and costs has crept up on us all, so most of us made the decision to shut from October to March.

“We would have to trade a lot over the current threshold in order for it to be worthwhile to stay open. It is a double-edged sword as we all had a really good summer last year, but we just can’t afford to keep trading over winter with the threshold at its current rate.”

If B&Bs choose to go above the threshold, this would potentially see customers take the hit with an increased price on rooms. However, more than likely it would be the hospitality provider who would take on the additional costs. Alan Long, director of accountancy firm The Long Partnership in Inverness, commented: “Providers can't really put up the costs of rooms as they have competition in the area.

“This means most of the time it is the provider who will take on this cost, and at the end of the day they need to go well above the current threshold to make a profit. Many businesses in the region operate just under the threshold in order to keep going.”

Rising costs and a low VAT threshold are cited as reasons for B&B closures during winter. Picture: James Mackenzie.
Rising costs and a low VAT threshold are cited as reasons for B&B closures during winter. Picture: James Mackenzie.

Ken Macrae of Kintail Finance in Inverness, says that the government should increase this threshold incrementally in order to support smaller businesses. He said: “The current rate has been the same for six years now.

“This ideally should be increased incrementally over the years in order to help our local businesses, so they can make a profit and continue to operate.”

Edward Mountain MSP added: “Highland B&Bs are a crucial part of our local economy and they are facing a tough climate due to the cost of energy crisis, which comes as a result of Putin’s illegal invasion of Ukraine.

“I am particularly conscious that families living in their Bed and Breakfasts are often trying to heat a property during the winter when there is no occupancy.

“I will continue to press the Scottish Government, when they are setting business rates, to ensure maximum relief is given to those businesses which can only generate income for a proportion of the year.”


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