Chancellor announces VAT cut to 5% for hospitality sector and “Eat Out to Help Out” discount voucher initiative

In a speech delivered today (8 July 2020), the Chancellor of the Exchequer, Rishi Sunak, has unveiled the Government’s “Plan for Jobs”, describing its goal as being “to protect, support and create jobs”.

That plan accordingly comprises those three constituent parts:

  1. support people to find jobs,
  2. create jobs and
  3. protect jobs.

You can download below the entirety of the Chancellor’ speech, but of particular interest to our clients in the hospitality sector will be the extract set out below, addressing the protection of jobs. It includes:

  • a cut in VAT from 20% to 5% on food, accommodation and attractions (to take effect from 15 July 2020 until 12 January 2021) and
  • an innovative “Eat Out to Help Out” discount voucher initiative to encourage people to eat out during August 2020.

More detail is provided in the following extract from the Chancellor’s speech:

The final part of our plan will protect jobs that already exist by helping some of our highest-employing but hardest-hit sectors: hospitality and tourism.

Our economy relies on consumption, especially social consumption:

The pubs, cafes, restaurants, hotels and B&Bs that bring life to our villages, towns and cities.

Taken together these sectors employ over 2 million people disproportionately younger, women and people from Black, Asian and minority ethnic communities.

And many rural and coastal communities rely on these industries.

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

So the best jobs programme we can do is to restart these sectors and get our pubs, restaurants, cafés and B&Bs bustling again.

I know people are cautious about going out.

But we wouldn’t have lifted the restrictions if we didn’t think we could do so safely.

And I’ve seen in the last few weeks how hard businesses are working to make their premises safe.

And if we follow the guidance, and respect what they ask us to do, we can all enjoy summer safely.

In turn, we need to give these businesses the confidence to know that if they open up, invest in making their premises safe, and protect jobs, demand will be there, and be there quickly.

So today, I’m announcing two new measures to get these sectors moving and protect jobs.

First, at the moment, VAT on hospitality and tourism is charged at 20%.

So I’ve decided, for the next six months, to cut VAT on food, accommodation and attractions.

Eat-in or hot takeaway food from restaurants, cafes and pubs;

Accommodation in hotels, B&Bs, campsites and caravan sites;

Attractions like cinemas, theme parks and zoos;

All these and more will see VAT reduced from next Wednesday until January 12th, from 20% to 5%.

This is a £4 billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere – all helping to protect 2.4 million jobs.

But, Mr Speaker, we will go further.

The final measure I’m announcing today has never been tried in the UK before.

This moment is unique. We need to be creative.

So, to get customers back into restaurants, cafes and pubs, and protect the 1.8 million people who work in them…

…I can announce today that, for the month of August, we will give everyone in the country an Eat Out to Help Out discount.

Meals eaten at any participating business, Monday to Wednesday, will be 50% off, 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, open next Monday.

Each week in August, businesses can then claim the money back, with the funds in their bank account within 5 working days.

1.8 million people work in this industry. They need our support and with this measure we can all eat out to help out.

A VAT cut to 5%;

And a first-of-its-kind government-backed discount for all;

That’s the third part of our Plan for Jobs.

UPDATE: More information about the “Eat Out to Help Out” Scheme has now been published. You can access it here or download it below.