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Chancellor announces hospitality VAT cut and ‘Eat Out to Help Out’ Scheme

Published 10 July 2020

With many hospitality businesses coming to terms with the ‘new normal’, including social distancing, routine temperature checks and wearing masks, it is clear that challenges lie ahead for the industry. However, it appears the government have taken notice of some of the industry’s concerns, as on Wednesday the Chancellor Rishi Sunak announced a VAT cut for hospitality businesses.

Sunak announced that he will cut VAT on food, accommodation and attractions from 20% to 5% from next Wednesday 15 July for six months until 12 January. Sunak commented “this is a £4bn catalyst benefiting more than 150,000 businesses and consumers everywhere – and helping to protect 2.4 million jobs.” In addition, Sunak announced that employers bringing staff back from furlough, and continuously employing them through to January, will receive a bonus of £1,000 per employee.

Alongside VAT cuts, Sunak introduced a new ‘Eat Out to Help Out’ scheme. For the month of August, guests will receive a 50% discount, up to £10 a head, on sit-down meals and non-alcoholic drinks from Monday to Wednesday. The voucher initiative will allow businesses to claim back money through the scheme weekly, with funds arriving within five days. Businesses will need to register to take part in the scheme, and can do so through a website which will open early next week.

Whilst there has been criticism and uncertainty surrounding the measures, many in the industry have reacted positively. Kate Nicholls of UKHospitality welcomed them, commenting “customer confidence is key to our sector’s revival and our ability to help Britain’s economic recovery. Whilst noting that many challenges still exist, most notably rent liabilities, Nicholls stated “the measures announced are extremely positive, though, and should give many businesses in our sector much-needed help to get going again in earnest.”

Many operators have also reacted to the news. Dom Fernando, owner of Soho’s Paradise says “the cut to VAT across the hospitality sector and the Eat Out to Help Out scheme is music to our ears, I am hopeful that this will boost the confidence of diners who are comfortable eating out to come and visit and the cut is great for independent restaurants like ours”, adding “we still need the government and other stakeholders including insurers, landlord and banks to play their part in our survival.”

Sam Buckley of Where the Light Gets In adds “at this time the industry needs all the help it can get so it’s welcomed news. We are being tested every day… this is giving us the means to survive and allows people who are comfortable to eat out an incentive to do so”, with Anna Haugh of Myrtle saying “it finally feels like we can breath again! It’s great news for our industry and will allow us a fighting chance.”

We will be updating our website with further developments as they happen. For the latest industry news, please subscribe to the CODE Bulletin here

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