UK Chancellor’s VAT cut doesn’t go far enough, claims bacta

Chancellor Rishi Sunak’s £25bn package to support jobs and stimulate the UK economy was announced yesterday and will bring a patchy coverage of benefits for the industry.

He announced a VAT cut to 5% for accommodation and attractions – from 15 July 2020 to 12 January 2021.  The reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.

There will also be a temporary cut in VAT to 5% for food and non-alcoholic drinks – which will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK.

Bacta CEO John White says, “While the cut in VAT to 5% went beyond what we had asked for, it is far more circumscribed than the Chancellor led us to believe. It only applies to accommodation and the entry price to visitor attractions and is not an across-the-board cut to help the whole industry. On food and drink, it is not entirely clear whether the VAT cut applies to takeaway food. The Chancellor recognised tourism businesses have been among the mostly badly hit industries yet didn’t extend the VAT cut to one of its key sectors – the seaside arcade. He must now cut MGD to 5% to help us get through the winter.”

The Chancellor also announced a Job Retention Bonus – A one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July.

 John White comments, “The £1000 bonus for those previously furloughed employees that are employed through to the end of January 2021 looks like it could be a helpful boost to payroll costs, but again we must await more details.”

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