UK VAT Cuts for Hospitality and Incentives for Restaurants

11th August 2020

As part of the government’s plan to enable the UK economy to get back on track, Chancellor of the Exchequer Rishi Sunak has announced two new measures to assist people to go out and “enjoy summer safely“.

Reduced VAT on UK hospitality and tourism industries

First and foremost, VAT on hospitality and tourism has now been slashed from 20 per cent to a mere 5 per cent for the next six months. The lowered rate applies to “food, accommodation and attractions”.

Whether your business provides accommodation in a hotel, B&B, campsite, hostel, or any other type of accommodation, the VAT rate is set to 5 per cent.

Pubs, eat-in diners, takeout food — all of these places can now charge just 5 per cent VAT, thereby offering an incentive to get people to eat out during these tough times, and so help these valuable businesses get back on their feet after being forced to close.

As for attractions, the Chancellor mentioned cinemas, theme parks and zoos specifically, but the official government web page provides a comprehensive list of which attractions this applies to: circuses, fairs, exhibitions, museums, and many others.

The reduced VAT rate for attractions only applies to admission fees.

Live online performances might also be able to qualify for the reduced VAT rate if certain criteria are met. Please check the government website above to verify if your live online performance qualifies.

“Eat Out to Help Out” discount

The second measure taken was, in the Chancellor’s own words, somewhat “creative”.

From 3 August to 31 August 2020, every single person in the UK will receive 50 per cent off their meal price at participating restaurants, up to a maximum value of £10 per person.

This discount also applies to children’s meals.

These discounts will be given all day on Mondays, Tuesdays and Wednesdays, for meals and non-alcoholic beverages.

There is no limit to the number of times a customer may use the discount. The only requirement is that the person claiming the discount must actually be eating or drinking.

The business will then be reimbursed by the government for the discount, with “funds in their bank account within five working days”, said Mr Sunak.

Unfortunately, food vans and businesses that only offer takeaways cannot register for this service. One can only hope that they will not lose much of their customers as a result of this measure.

How to register

You must go to this website in order to register your business. There are several criteria that must be met in order for you to qualify, so please read the instructions carefully.

You will need your Government Gateway ID, password, name and address of your business, UK bank account details, the business address registered with your bank and the date you started trading in order to register.

Register your business

Promotional materials for registered businesses

Once you are registered, HMRC will provide you with some promotional materials that you can use to attract clients to come in for their discounted meals. These materials include A3 posters for displaying on your window or outside on a sandwich board; “table talkers“; A4 posters and social media images.

Finding participating businesses

Your business will also be added to a database maintained by HMRC so that people can search for a participating restaurant in their area.

All they have to do is type in a postcode, and a list of registered restaurants will come up for them to choose from.

A quick test using a random UK postcode shows a staggering number of eateries that have already registered for the service, no matter the postcode selected.

I could not figure out how the list is sorted, but it isn’t random. Hopefully, this will not lead to unfairness to registered businesses if they are lower down on the results.

UK incentives compared to other European countries

A number of European countries have cut VAT in order to purportedly give the economy a boost. Some of those VAT cuts are more sweeping than the UK’s, some less.

UK incentives compared to other European countries

Germany cut its VAT rate from 19 per cent to 16 per cent and its VAT on food and digital goods from 7 per cent to 5 per cent. Portugal reduced VAT for gyms and health club memberships to 6 per cent. And there are plenty of others.

But the UK is the only one I’ve heard of that has such a unique scheme to get people to eat out.

Bon appétit!

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