As has been well publicised, the UK Government has cut the VAT rate on hospitality, primarily restaurants and hotels, from 20% to 5%.
The tax cut runs from 15th July until 12th January 2021.
Hotels have no obligation, to the general public, to refund the difference on any existing bookings. Pricing to the public is always shown as the total including taxes, and the hotel (or restaurant) is under no obligation to refund you if the tax element changes.
It is different for business customers who may have booked via a portal which displayed prices excluding VAT. In these cases, the total price paid needs to reflect the original ex-VAT price quoted.
Whilst you may not get a refund on your prepaid booking, the VAT cut does impact the points you earn.
How are hotel loyalty points calculated?
Hotel chains award loyalty points based on the ex-VAT price you pay. As the VAT element has now dropped, you are due more points. This doesn’t seem to be happening at some hotels, looking at reports.
For example, let’s imagine you booked a £100 Holiday Inn room in the UK.
IHG Rewards Club, which is the loyalty scheme which includes Holiday Inn, awards 10 base points per $1 spent. Let’s call this 13 points per £1 for simplicity. This is based on the price you paid EXCLUDING taxes.
For stays before 15th July, your £100 represented £83.33 of hotel room and £16.67 of VAT. At 13 points per £1, you would have earned £83.33 x 13 = 1,083 base points.
For stays from 15th July, your £100 represents £95.24 of hotel room and £4.76 of VAT. You should earn £95.24 x 13 = 1,238 base points.
It is worth taking a look at your points statements for UK hotel stays and making sure that the calculation is correct.
This is rarely easy, because hotels often use poor exchange rates when converting the £ value of your stay into $ for the purposes of awarding points. The gap here is so big, however, that it should be clear if 5% or 20% VAT has been assumed.