Category: Expert Opinion

Summer Economic Update – Hospitality & VAT

So many of our local communities and economies depend on visitors and tourism. The hospitality sector plays a vital role in UK life in particular for Scotland, Wales and several regions of England.  This sector, which normally accounts for over 2.4 million workers equivalent to 8% of the entire UK workforce, has been deeply affected by the Coronavirus.

Our pubs & restaurants and holiday accommodation & attractions have been closed for many months are now starting to reopen amid general concerns from the public in attending such premises with the virus still in circulation.

The government “Plan for Jobs” announces targeted measures to encourage people to return to their normal habits and make the most of reopening within these sectors in order to support businesses and protect jobs and they have announced the following:

Eat Out to Help Out

In order to support around 130,000 businesses and to help protect the jobs of their 1.8 million employees, the government will introduce the “Eat Out to Help Out” scheme to encourage people to return to eating out. This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the entire month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount.

This is a novel idea, not linked specifically to taxation.  We have already seen the claims made under the Corona Virus Job Retention Scheme and Self Employed Income Support Scheme have been processed and made quickly resulting in cash being paid by the government in a short timeframe which is impressive when designing systems from scratch.  Accordingly these businesses will be reassured that the claims they make should be processed quickly.  The question comes as to whether the public have the confidence to go out, or the finance available to spend on a meal out to take advantage of the scheme which we will only see in the fullness of time.

Temporary VAT cuts

Now we have left the EU it remains easier for us to dictate our own VAT policy and again to help the hospitality sector the government have announced a temporary VAT cut for food and non-alcoholic drinks – From 15 July 2020 to 12 January 2021.  During this period the reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. Furthermore this reduced (5%) rate of VAT will also apply to supplies of accommodation and admission to attractions across the UK. We understand that further guidance on the scope of these reliefs will be published by HMRC in the coming days.

Let’s hope that an already struggling sector, heeds the intention of these VAT cuts and reduce their VAT inclusive prices accordingly to pass the ultimate benefit of these temporary reductions in VAT to the consumer and general public.


Comment from Mithra at The Coconut Tree Cheltenham following today’s announcements:

“We are generally feeling very positive about the opportunities for us despite the hardship and challenges being faced by everyone. Our business has been providing takeaway meals recently which have been very popular. The cut in VAT will have a big, positive impact on our business and is very welcome. It is good to hear about the voucher scheme and we will be carefully considering this to assess whether this will mean we can safely reopen in the short term, particularly as the scheme is limited to August. That said, as reopening would involve a significant amount of work we would not want to be in a position where we felt it was necessary to close again at the end of August.”