Chancellor cuts hospitality VAT to boost economy
UK chancellor of the exchequer, Rishi Sunak, has announced temporary cuts in value added tax in an attempt to simulate the hospitality sector.
The measures are part of a wider packaged designed to mitigate the impact of Covid-19 on the UK economy.
From July 15th, VAT will fall from 20 to five per cent for supplies of accommodation and admission to attractions.
The change will remain in place until January 12th next year.
At the same time, VAT will temporarily be cut for food and non-alcoholic drinks.
In a measure “to support businesses and jobs in the hospitality sector,” the five per cent rate will also apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the country.
The reduced rate will again apply from next week and run to early 2021.
Further guidance on the scope of the relief is expected to be published by HMRC in the coming days.
Sunak also announced measures to help get customers back into restaurants, cafes and pubs.
He told the Commons: “I can announce that, for the month of august, we will give everyone in the country an ‘eat out to help out’ discount.
“Meals eaten at any participating business, Monday to Wednesday, will be 50 per cent off, up to a maximum discount of £10 per head for everyone, including children.”
Businesses will need to register for the scheme through a website expected to launch on Monday.
“Each week in August, businesses can then claim the money back, with the funds in their bank account within five working days,” explained the chancellor.
Customers do not need to do anything to claim a discount, it will be automatically applied to a meal.
Joss Croft, chief executive of UKinbound, welcomed the moves.
He said “The chancellor’s economic recovery plan clearly recognises the value of hospitality and tourism, and cutting VAT from 20 per cent to five per cent and the ‘eat out to help out’ scheme will deliver immediate positive impacts for businesses and consumers.
“These measures will not help the many businesses involved in inbound tourism who drive regional economies and jobs, and who are on the brink; longer-term support will still be required for these businesses, which have been hit even harder than domestic and outbound.”
An ABTA spokesperson welcomed the support, but said more help was needed.
“We welcome the chancellor’s announcement, as it is good news for domestic tourism.
“However, the lack of backing for outbound tourism represents a missed opportunity, as this is a sector that directly provides 220,000 jobs right across the UK and is in urgent need of tailored support.
“We shall continue to press for additional support measures for the travel and tourism industry in the coming weeks.”