BUSINESS leaders are urging the government to reduce VAT on rural tourism services.

VAT on the supply of rural tourism services should be reduced from 20% to 7%, said a key report by the Country Land and Business Association.

Timed to coincide with English Tourism Week, the Wish You Were Here? document says VAT should be cut for people who provide accommodation and other services for tourists in the countryside.

The report also argues against the so-called "bed tax" - a levy on visitors for every night they sleep in tourism accommodation that the CLA says would make business uncompetitive.

CLA president Harry Cotterell said: "Tourism is a major source of diversification for farmers as well as being the primary business for many who live in the countryside.

"It is essential that tourism raises its game in terms of quality and scale."

Reducing the rate of VAT to 7% would bring Britain into line with the rest of the EU, said Mr Cotterell.

The increase in VAT from 17.5% to 20% – the highest in Europe – had severely restricted the economic viability of rural tourism businesses and disadvantaged Britain compared to our European competitors.

"The prohibitively high rate of VAT makes tourism overly expensive for many prospective visitors," said Mr Cotterell.

It also discourages farmers from diversifying into rural tourism because it makes sense for them to be VAT registered for their farming activities but not for working as relatively small-time tourism providers."

Mr Cotterell said the CLA was lobbying against the introduction of a bed tax in England and Wales.

He said: "A local authority-imposed bed tax may increase revenue in the short term but could also do long-term damage to the rural tourism industry."

The Wish You Were Here? policy document on rural tourism can be read here.