VAT cut to be extended for bars and restaurants

The chancellor has announced the extension of a VAT cut for the hospitality and tourism sectors – some of the worst-hit by the pandemic.

Rishi Sunak said that the temporary reduction of VAT rates from 20% to 5% would remain in place until 31 March 2021, rather than 13 January.

The measure would “help protect 2.4 million jobs through the winter”, he said.

But industry figures said that they were “still not out of the woods”.

Restaurants and pubs in particular were affected by lockdown measures.

The temporary VAT cut first came into force in July and was designed to help hotels, restaurants, cafes and pubs to shore up their finances.

Some firms, however, such as KFC, Nando’s and Pret, decided to pass on the savings directly to customers by cutting prices in their outlets.

The chancellor said on Thursday that the extension to the VAT cut would help “support more than 150,000 businesses” through the winter period.

‘Some reason to be positive’

The chief executive of trade association UK Hospitality, Kate Nicholls, said that the cut provided some good news for the sector after it was announced that pubs and restaurants in England must now close at 22:00 BST.

“The announcement of further restrictions was a significant hammer blow that will inevitably depress trading,” she said.

“It was crucial that the chancellor delivered support today that specifically targeted the hospitality sector which has been hit harder than any.

“The chancellor has given us some reason to be positive again but we urge him to engage with the trade on specific measures to keep people in work.

“While some of these measures announced today will give businesses a future to shoot for and hope that they can begin to rebuild, we are still not out of the woods.”

In an attempt to boost consumer demand, Mr Sunak introduced the “Eat Out to Help Out” scheme in August as restaurants and cafes gradually reopened over the summer.

Under the scheme, diners got a state-backed 50% discount on meals and soft drinks up to £10 each on Mondays, Tuesdays and Wednesdays.

Earlier in September, the Treasury said that more than 100 million meals had been claimed under the scheme, which saw restaurant bookings surge.

  • Hospitality industry
  • Rishi Sunak
  • Restaurants
  • UK taxes
  • Coronavirus lockdown measures
  • Coronavirus pandemic
  • Companies
  • HM Treasury
  • Tax

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