In January, UK Hospitality’s budget submission highlighted two key areas where support was required to enable the continuation of many businesses in the sector.
- An extension of the VAT cut to 5% for a further 12 months, and ensure it applies across the broad hospitality sector, to stimulate economic growth.
- Enact a further business rates holiday for hospitality for 2020/21 to protect communities and repair businesses.
The chancellor addressed both points directly with the following measures:
The temporary reduced rate of VAT of 5%, introduced on 15 July 2020, will be extended again until 30 September 2021.
From 1 October 2021 until 31 March 2022, the temporary reduced rate of 5% VAT will change to the new reduced rate of VAT of 12.5%.
The standard rate of 20% will return on 1 April 2022.
The business rates holiday will be extended for a further three months to 30 June. From 1 July, rates will be discounted for the remaining nine months of the year by two-thirds, estimated as a £6bn tax cut for the sector.
Whilst the government clearly recognises that the above tax cuts are necessary for hospitality businesses while lockdown restrictions are still in place, they have also introduced a reduced rate for the latter part of this year, from 1October 2021 to 31 March 2022. The government expects business to pick up, reducing but not eliminating the need for these tax cuts. It will be interesting to see if the proposed roadmap is achieved and if not, will the tax cuts be extended further?
Businesses within the hospitality sector can also benefit from the extended furlough scheme, restart grants of up to £18,000 per premises, loan guarantee schemes, and statutory sick pay rebates.
Finally, to raise everybody’s spirits – the duty on beer, cider, wine and spirits will be frozen for a further 12 months.
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