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Six-month VAT cut to 5% for hospitality and tourism

Published:  08 July, 2020

Chancellor Rishi Sunak has announced a major cut to VAT for the hospitality and tourism sectors as they emerge from lockdown, as well as a first of its kind government-backed discount to help encourage customers to get back to the nation's bars, pubs, restaurants and cafes.

The cut on VAT, which will last until 12 January 2021, is a £4bn catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses and helping to protect 2.4 million jobs.

It only applies to food and non-alcoholic drinks. 

The announcement was made today as part of a raft of measures aimed at saving jobs and businesses and kickstarting the economy.

“At the moment, VAT on hospitality and tourism is charged at 20%,” Sunak said. “So I’ve decided for the next six months to cut [VAT] back on food accommodation and attractions. Eating or hot takeaway food from restaurants, cafes and pubs, accommodation in hotels B&Bs, campsites and caravan sites, and attractions like cinemas theme parks and zoos – all these and more, we’ll see VAT reduced from next Wednesday, until 12 January, from 20% to 5%.”

As well as the cut to VAT, Sunak said he is launching a “unique measure” that has “never been tried in the UK before”.

He explained: “To get customers back into restaurants, cafés and pubs and protect the 1.8 million people who work in them, I can announce today for the month of August, we will give everyone in the country an eat-out-to-help-out discount on meals eaten at any participating business from Monday to Wednesday. The discount will be 50% of up to a maximum discount of £10 per head for everyone, including children. Businesses will need to register and can do so through a simple website which will be open next Monday. Each week in August, businesses can then claim the money back with the funds in their bank account within five working days.”

Sunak said today that the measures are vital to kickstart the economy which “relies on consumption, especially social consumption, in the pubs, cafes, restaurants, hotels and B&Bs that bring life to our villages, towns and cities”.

He added: “Taken together, these sectors employ over two million people, disproportionately younger women and people from black, Asian and minority ethnic communities, and many rural and coastal communities rely on these industries.”

Around 80% of hospitality firms temporarily stopped trading in April and 1.4 million workers have been furloughed – the highest proportions of any sector.

As a way of boosting economic activity and propping up the government’s promise of supporting and creating jobs, the government is also launching a £2bn work placement scheme for young people most at risk of unemployment.

For more on the work placements scheme and how it will help to reinvigorate the hospitality sector, visit this afternoon.