UK Slashes Hospitality VAT Rates to 5%

Chancellor Rishi Sunak announced today (8 July) in his summer statement that he will be cut VAT from 20% to 5% for parts of the hospitality sector. This reduced rate will be in effect from 15 July 2020 until 12 January 2021 at a cost of £4billion, adding to the eye-watering £49 billion already spent on COVID-19 relief. 

The hope is that the VAT cut will secure jobs in the hospitality sector. The new VAT rate will be applied to both eat-in and takeout food, accommodation and attractions.  

This is over and above Sunak’s announcement of the “Eat out and help out” discount scheme which encourages the public to eat out and the scheme will provide a 50% reduction up to the value of £10 per head for sit down meals in cafés, restaurants and pubs. This discount will be available every Monday and Wednesday throughout August. 

The Chancellor said that with these two initiatives combined, they will support over 2.4 million staff across 150,000 businesses. The VAT cut alone is set to save households around £160 per year. 

According to Sunak, 80% of hospitality firms stopped trading in April and 1.4 million hospitality workers have been furloughed under the Coronavirus Job Retention Scheme – the highest proportion of any sector. (source)   

This follows the UK’s recent move to cut vat rates on e-books. The UK also follows many other EU countries to have already cut VAT rates on many goods and services most notably around hospitality, entertainment and medical equipment. 

The news comes as a deeply-felt relief for many in the hospitality industry. 

It was reported in bighospitality.co.uk, that CEO of the Hospitality Professionals Association (HOSPA), Jane Pendlebury said: “The reduction in VAT is absolutely massive news for the hospitality industry.” 

“It’s not often that I can say I’ve felt a rush of emotion following a House of Commons announcement but today, I certainly have – and that’s something that just serves to underline how much of a huge relief the latest measures are, ” said. (source)