The Chancellor’s recent Summer Statement contained a range of measures targeted at the hospitality sector to help kick start these businesses’ emergence from lockdown.
The main measure is the temporary reduction in the rate of VAT for a range of products and services provided by the hospitality sector from the standard rate of 20% to just 5%. The temporary rate cut will be effective from 15 July through to 12 January 2021. Businesses within the sector, if they haven’t done so already, need to adapt their systems to ensure they take maximum benefit from this measure and ensure their VAT Returns covering this period are correct.
The temporary rate cut will apply to supplies of:
- food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs
- hot takeaway food
- hot takeaway non-alcoholic beverages
- sleeping accommodation in hotels or similar establishments
- holiday accommodation, and
- pitch fees for caravans and tents, and associated facilities.
Anything supplied which is not on this list continues to bear VAT at the 20% standard rate. The 5% rate will, however, apply to admission fees to a variety of attractions that are not already within the cultural VAT exemption. This will include theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions, and similar cultural events and facilities.
The VAT rules applying to businesses within the sector are already complex and the measures announced, whilst welcome, add to these complexities. A range of VAT regimes already apply to the sector and Customs have updated most of their guidance and Notices to incorporate the temporary rate cut and its impacts.
If you are unsure about anything or would like assistance with making the necessary adaptations, then please contact us here at HSKS Greenhalgh.
At the same time the Chancellor announced the `Eat Out to Help Out Scheme’ which aims to provide direct financial assistance to restaurants.
The scheme, for which eligible businesses must register at https://www.gov.uk/guidance/register-your-establishment-for-the-eat-out-to-help-out-scheme, will run from 3 August to 31 August. It enables businesses to offer a 50% discount on food and non-alcoholic beverages (up to £10 per diner) consumed on the premises or in a shared dining area used for `eat-in’ meals.
Eligible businesses must have been registered as a food business with their local authority on or before 7 July.
Takeaway food businesses, mobile catering services for private functions or operators from vans or trailers will not be eligible. Hotels that provide room service only will also be ineligible.
Following registration and compliance with the scheme rules, businesses will be able to claim from 7 August, up until 30 September (for meals sold 3 to 31 August inclusive).
VAT and income or corporation tax is based upon the full amount of the customer’s bill before any discount. Any sums reimbursed by the Government are simply a contribution towards the full cost.
Again, if you are having difficulty registering or understanding the scheme then seek advice asap given the limited period the scheme will apply.