£30bn UK Government Summer Economic Update

9 July, 2020

The Chancellor of the Exchequer, Rishi Sunak, recently outlined further incentives to stimulate the UK economy. If you are a business owner, particularly in the hospitality and tourism sector this stimulus package could mean you need to act now in order to benefit from the package and comply with changes to regulations, this is particularly important for VAT registered businesses. We have put together this guide outlining some of the key announcements made by the Government on 8 July 2020, at the end of the document you will find links to further guidance on this topic.

The £30bn package includes:

  • Reducing stamp duty on main homes by increasing the stamp duty threshold from £125,000 to £500,000 effective immediately until 31 March 2021 (in England and Northern Ireland only).
  • Green Home Grants for homeowners and landlords covering up to 2/3 of energy efficiency improvement costs up to a maximum improvement cost of £5,000 (available in England only).
  • Furlough will end in October however a £1,000 cash bonus for each ‘re-employed employee’ will be available to employers providing the employee is continuously employed from October until at least January 2021 on an average wage of at least £520 a month.
  • Apprenticeship incentives will give employers a cash bonus of £2,000 for apprentices aged 16-24 and £1,500 for apprentices aged over 25. These cash bonuses are available in addition to the £1,000 cash bonus for re-employing furloughed employees.
  • ‘Kick-start for jobs’ program targeted at those aged 16-24 years old will provide employers with funding to pay employees the National Minimum Wage for 25 hours per week plus National Insurance contributions and minimum enrollment pension contributions for a period of 6 months.
  • VAT charged on food, accommodation and attractions will be reduced from 20% to 5% for the period 15 July 2020–12 January 2021. See below for more details.
  • ‘Eat Out to Help Out’ scheme to help the hospitality sector. See below for more details.

Specific Support for Hospitality & Tourism

VAT Reduction on Food, Accommodation & Attractions

As mentioned above, if you own a business in the hospitality or tourism sector, you may benefit from the Chancellor's recent announcement however you may also have additional compliance requirements you need to address. The rest of this document focuses on specific support available and changes applicable for businesses in the hospitality and tourism sectors.

From Wednesday 15 July cafes, pubs, restaurants, theme parks, and accommodation providers will benefit from reduced sales tax charged on eat-in and takeaway hot food, non-alcoholic beverages, and attractions such as cinemas, theme parks and zoos. Hospitality and tourism business owners will can reduce VAT from 20% to 5%. The reduction is intended to encourage consumers to spend money in the hospitality and tourism sectors. The reduction will operate from 15 July 2020 – 12 January 2021, this means that businesses will need to change VAT rates mid-week on two occasions.

If you are a business owner registered for VAT in the hospitality or tourism sector you should consider the following to make sure your business is ready:

  • Update your billing/receipt systems so you are ready to charge decreased VAT as of Wednesday.
  • Ensure you can separately account for sales of alcohol separately to items which will have a reduced rate of VAT applied.
  • Ensure staff are aware of the changes to VAT rates and the products the reductions apply to.
  • On 15 July 2020 you can charge VAT at 5% instead of the usual 20% on eat-in and takeaway hot food and non-alcoholic beverages.
  • You can continue to claim 20% input VAT on any vatable purchases you have incurred as normal.
  • The reduction in VAT will cease on 12 January 2021, so you must increase VAT to 20% on this date.
  • The timeline for submitting VAT returns will not change.
  • VAT on alcoholic drinks does not change.

‘Eat Out to Help Out’

Hospitality businesses can register for the ‘eat out to help out’ scheme as of Monday 13 July. The scheme will operate for the month of August and will provide consumers a discount of 50% per head up to a maximum of £10 on meals Monday–Wednesday. Businesses part of the scheme will be able to claim back the discount offered to individuals from the government each week and the funds will be in business bank accounts within 5 days.

Sign up to the scheme online from Monday.

Find out more about the Government’s plans for jobs here