VAT Cuts For Hospitality: Will This Help Businesses Survive?

VAT Cuts for The Hospitality Sector

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Rishi Sunak – Chancellor at the Exchequer, has made the announcement that the UK is to extend the VAT cut for the tourism and hospitality sectors. These are the sectors that are considered to have been worst hit by the pandemic, and are struggling to strengthen themselves again post-COVID.

However, with hospitality venues reopening safely and the VAT cut being extended, things are looking up for the sector. We’re giving you a quick run down of the latest VAT cut news, to help you understand what it could mean for your business.

What Is The VAT Cut Extension?

The VAT Cut extension was originally laid out by Rishi Sunak in July, and was a temporary 5% reduced rate of VAT for the hospitality sector as opposed to the usual 20%. The original plan was to run this VAT cut until January 13th 2021, however the reduction is now going to remain in effect until the time of 31st March 2021. The given measure is aimed at protecting around 2.4 million jobs across the United Kingdom throughout winter. 

Many believe that the VAT cut extension will be crucial to the sector. Since the implementation of the lockdown measures in the UK, pubs & restaurants have been affected and thousands of jobs across the sector have been lost. As such, it will be a welcome relief for many businesses that the VAT cut has been extended.

Why Did The Government Proceed With A VAT Cut?

The temporary version of the VAT cut initially came into effect in July 2020 and was designed to help restaurants, cafes, hotels, and pubs with cash flow during COVID. Whilst many businesses needed to use those savings to keep their business afloat, some bigger brands including KFC, Pret, and Nando’s, have been making the decision to pass on the savings to the customers directly by reducing prices in the respective outlets. 

While announcing the VAT cut, the Chancellor revealed that its extension would continue to help in supporting over 150,000 businesses across the winter period. The tax cut applies to non-alcoholic drinks and food, accommodation, and entry to leading tourist attractions across the United Kingdom. 

VAT Cut - A Positive Move For The Hospitality Sector

The Chancellor has made good progress in boosting the hospitality sector during this difficult time. Mr. Sunak’s “Eat Out to Help Out” scheme was popular in August as cafes and restaurants started opening gradually post-summer. Under the scheme, the diners received around fifty percent discount backed by the state on food & soft drinks around £10–each on Mondays, Tuesdays, and Wednesdays.

While the woes of the sector are certainly not over yet, the VAT cuts for the hospitality sector are likely to support those businesses that are struggling and encourage consumers to continue dining out, if the discounts are passed down.

For more information on the temporary VAT cuts for hospitality businesses, and to see whether your business is eligible, take a look at the UK government website. Alternatively, you can read up on the latest hospitality technology and mobile ordering insights over on our blog.