Mairéad Warren De Búrca, Managing Director
July 8, 2020 / Europe
In addition to existing fiscal measures and VAT easements to stimulate the economy in response to the COVID-19 crisis, the U.K. Chancellor has announced a temporary VAT reduction for the beleaguered hospitality and tourism sectors.
The temporary VAT reduction (20% to 5%) will take effect from 15 July 2020 and be in force until 12 January 2021. The reduced VAT rate of 5% will apply to the following supplies:
Alongside this, the U.K. Government will introduce a ‘Eat Out to Help Out’ scheme to encourage U.K. consumers to eat out. The scheme will entitle consumers to a 50% discount (up to a max of £10 per person) on their meal at participating restaurants, cafes pubs or similar establishments. This discount will be valid from Monday to Wednesday on any eat in meal and non-alcoholic drink for the month of August 2020 and participating establishments will be fully reimbursed for the discounts offered.
What does this mean for you?
Businesses operating in the hospitality and tourism sectors will need to make system and accounting changes including the following:
There are still a number of open points for example, what VAT rate would be applicable to service charges levied by the sector. Further guidance on the scope of the reliefs will be published by HMRC in the coming days.
The VAT rate cut is certainly welcome news for the hospitality and tourism sectors however, it does not cover other sectors including retailers and the aviation industry. They have also undoubtedly suffered during this crisis which brings into question whether the Government has gone far enough to help support and reignite these sectors. While this, unfortunately, has not been announced today, it may be something that will be forthcoming in the Autumn budget statement. A more extensive VAT rate reduction would have been beneficial to the wider economy…
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