Trade welcomes 5% VAT rate

Raft of Westminster measures will also see the UK Government pick up the tab for discounted meals in hospitality venues

VAT on food and accommodation in hospitality venues is to be cut to 5% for the next six months and consumers offered discounted meals in venues as part of a raft of new measures designed to kickstart the economy in the wake of the COVID-19 lockdown.

Chancellor Rishi Sunak today (July 8) announced that the VAT cut would come into effect from Wednesday July 15 and last until January 12 as one of two measures to boost the hospitality sector.

The other will see food businesses encouraged to offer customers a discount on their meal from Monday to Wednesday every week in August, with the discount subsidised by Westminster.

Dubbed ‘Eat Out to Help Out’, the initiative will offer customers a £10 discount per head on any meal in participating venues.

In order to take part businesses will need to register on a UK Government website (to go live on Monday, July 13), which will then allow them to claim back the cost of the discounts (ie £10 per head, per meal).

Sunak said the money would be in the business’s bank account within five working days.

In addition to the two hospitality-specific measures, other initiatives included a Jobs Retention Bonus for any company that brings furloughed employees back – amounting to £1000 per employee – and a Kickstart Scheme, which will pay businesses to hire employees between 16 and 24 years old. Sunak said the scheme will cover the first six months of the employee’s salary “plus an amount to cover overheads”.

The UK Government will also pay companies to create apprenticeships, with businesses able to apply for £2000 per apprentice.

The announcements have been broadly welcomed by trade and consumer groups.

Scottish Tourism Alliance (STA) chief executive, Marc Crothall, said the measures “go beyond what we had anticipated” and represent “a huge catalyst for the tourism economy”.

He added that the STA will “be pushing” for the Eat Out to Help Out initiative to be brought forward from August in order to coincide with the reopening of Scottish venues next week.

UK Hospitality chief executive, Kate Nicholls, said the VAT cut and eating out initiative show that the UK Government “acknowledges that our sector has been uniquely hit by this pandemic”.

“Customer confidence is key to our sector’s revival and our ability to help Britain’s economic recovery,” said Nicholls.

“Applying every precaution to provide safe venues will count for nothing if customers are not coming through our doors. This significant VAT cut, heightened ability to retain staff and incentives for consumers to eat out together amount to a huge bonus.

“We hope that the UK public rightly sees it as a sign that we are ready to welcome them back safely. The future of many businesses and jobs depends on it.”

However, other groups expressed disappointment that Sunak had not gone further.

Scottish Licensed Trade Association (SLTA) managing director, Colin Wilkinson, said that although the various measures announced by the chancellor were welcome, “from the hospitality sector’s perspective Rishi Sunak needed to do more”.

“The entire industry needs ongoing support for many months, stretching to years if it is to recover to anything like the level it was prior to COVID-19,” said Wilkinson.

And consumer group CAMRA (the Campaign for Real Ale) said it was “concerned that pubs have been left behind by the chancellor’s statement”.

“It is also disappointing to see no direct support for independent brewers and producers, who will not benefit from a VAT cut that specifically excludes beer and cider,” said chief executive Tom Stainer.

Meanwhile, accountancy firm MHA MacIntyre Hudson has warned that businesses will need to prepare for the VAT cut in order to avoid “an administrative tangle”.

“The emergency VAT cut is great news for travel and tourism but sudden VAT cuts always raise substantial administrative issues,” said a spokesman for the firm.

“Businesses must get on top of their preparation. In this case any premise serving alcohol will have to re-programme its tills to deal with three different VAT rates: one for alcohol at 20%, one for cold take-away food at 0% and 5% for everything else.”