Reeves cuts VAT on summer attractions to 5% in cost-of-living support

Chancellor Rachel Reeves announced a temporary cut in value-added tax to 5% on summer attractions such as theme parks and soft play centers during school holidays, aiming to ease the financial strain on households affected by the conflict in Iran.

Reeves told lawmakers Thursday she would also increase taxes on global oil companies operating in the United Kingdom to help fund the measures.

In addition to reducing VAT from 20% to 5% on tickets for attractions and children’s meals during the summer, Reeves confirmed she had postponed fuel duty increases originally scheduled for September and December.

The chancellor also said she would suspend import tariffs on certain foods, adding: “I expect supermarkets to pass these savings on in full to their customers.”

A more ambitious plan that would have required supermarkets to commit to fixed prices for staple foods in exchange for reduced regulatory burdens was rejected by retailers.

Reeves said she would raise the tax-free mileage rate for workers claiming driving costs by 10 pence per mile, a move she said would benefit “those who need to drive for work, from care workers to plumbers.”

The chancellor listed summer attractions eligible for the temporary VAT reduction, including zoos, museums, theme parks, soft play venues, children’s theater tickets, and meals.

The costs will be partially offset by changes to the “foreign branch profits” regime, which governs how multinational oil companies pay taxes on their UK operations.

“We must ensure that those who benefit from increased prices and volatility pay their fair share,” Reeves said, indicating the change could raise several hundred million pounds.

“Currently, some oil and gas groups that operate overseas through foreign branches have structured their tax affairs in a way which ensures they pay little or no corporation tax on their UK energy trading profits. Today we are putting an end to that practice.”

Reeves began her statement by highlighting the economy’s strength before the Iran conflict, noting that the latest official figures showed the UK economy grew 0.6% in the first quarter, the fastest among G7 nations.

“We have the right economic plan, but the conflict in the Middle East poses a significant challenge to the world’s economies, including our own,” she said.

Reeves declined to specify how she plans to support families during the upcoming winter when utility bills are expected to rise sharply, but reiterated that any such scheme would be “targeted and temporary.”

She also announced support for industries hit hard by rising energy costs, including £350 million set aside for a “critical chemicals resilience fund” to support strategically important producers and £120 million for the ceramics sector.