Donegal food hospitality firms to benefit from 9% VAT rate while Derry peers face 20% rate

The VAT rate in the 26 counties is currently set at 13.5 per cent but it’s being reported Fianna Fáil and Fine Gael have agreed to reduce this to nine per cent as part of their draft programme for the incoming government.

This would lead to a huge differential in the VAT rate paid by hospitality businesses in Donegal and in Derry, where the VAT rate is currently set at 20 per cent.

Mr. Neill said: “The time for action on Northern Ireland's hospitality VAT rate has long since passed. The UK Government must stop ignoring the crisis in our industry, recognise the special circumstances under which we operate and act accordingly.

"The Northern Ireland Executive must represent our case to Westminster and ensure that the playing field on the island of Ireland is evened out.

"The incoming Irish Government has signalled its intent to lower the VAT rate for food-based hospitality to 9 per cent. This means that the hospitality VAT rate disparity on the island will further increase, with Northern Ireland's rate standing at 20 per cent.”

During the COVID-19 pandemic hospitality businesses in Derry benefited from a reduced rate of 12.5 per cent until 2022 when the 20 per cent rate was restored.

Across the border a temporary 9 per cent VAT rate was introduced during the pandemic prior to being hiked to 13.5 per cent in 2023.

But it is now poised to be reduced to COVID levels when Budget 2026 is introduced in the autumn.

Mr. Neill said: "Hospitality is the cornerstone of our tourism offering, with the sector accounting for four in five tourism jobs. The island is marketed as one tourism destination, yet two widely disparate VAT rates will now be in operation on the island.

"With the possibility of the introduction of an ETA scheme on the border, Northern Ireland businesses are operating at a significant disadvantage compared to their southern counterparts."

Major relaxations to Derry pub licensing laws take effect this weekend