Following the deal between the Tories and the Northern Irish party, a report will be commissioned looking into the impact of VAT and Air Passenger Duty (APD) on Northern Ireland’s tourism sector.

With it facing stiff financial competition from businesses in Ireland, it could lead to a cut in both taxes which could then be rolled out across the UK.

Ian Bell, head of travel and tourism at auditing and tax consultancy firm RSM, said: “In Northern Ireland, tourism-related businesses pay 20 % VAT, compared to 9% VAT for equivalent businesses in the Republic of Ireland.

“This creates a competitive disadvantage where businesses in Northern Ireland are forced to cut prices, reducing their ability to invest, or risking losing out on business by being too expensive.

“EU law currently prevents member states from setting different levels of VAT for different regions. However, after the UK has left the EU, this power will be repatriated to the UK.

“It is expected that the proposed report will investigate the impact of reducing the rate of tourism VAT in Northern Ireland once it is not necessary to adopt a one-size-fits-all VAT policy across the whole of the UK.

“Inevitably, if a lower rate of VAT applies to tourism in Northern Ireland, then the tourism industry in the remainder of the UK will renew its calls for a lower rate of VAT to help it compete in the international tourism market at a time when sterling is weak.”

Bell said such a change in rules could also be extended to APD too, adding: “Campaigners for change argue that devolving APD to Northern Ireland, with a view to ultimately abolishing it, would generate economic benefits which exceed the tax lost.

“While detailed work will be undertaken to model the likely impact of such changes, the ultimate test will be what happens in practice.

“With the prospect that both Scotland and Northern Ireland might follow similar courses, wider pressure for the UK to mitigate its APD regime will increase.”