The Chancellor’s Summer Budget has received mixed reviews from bodies in the licensed trade. While the British Beer and Pub Association welcomed the tax cuts, the British Hospitality Association slammed George Osborne for not consulting before introducing a new National Living Wage increase.
The Budget offered (in summary) a corporation tax cut of 2% was promised by 2020 with a decrease from 20% to 19% in 2017, while a National Living Wage increase was revealed for over-25s. This means an hourly rate of at least £7.20 an hour which is to rise to £9 an hour by 2020. This was balanced by a fall in Employers National Insurance contributions by £1,000 from April 2016, when the Employment Allowance is due to rise from £2,000 to £3,000. The Annual Investment Allowance also rose to £200K which allows the licensed trade to deduct thevalue of items such as equipment and machinery, up to £200K, from their profits before tax.
The British Beer & Pub Association welcomed the tax cuts Brigid Simmonds, Chief Executive of the BBPA commented, “Some of the measures, such as the Living Wage and reductions in tax credits, will have a knock-on effect on the cost of employment for pubs, so the tax cuts announced today are a welcome and necessary balancing measure.
She continued, “As well as the tax cuts announced, we will be looking to see that the Government continues to support brewing and pubs in other parts of the tax system, such as through future action on business rates and further cuts in beer duty, which are a big help to pubs.”
However the British Hospitality Association was as it put it “rather cross”. Said Ufi Ibrahim, Chief Executive of The British Hospitality Association, said, “Hospitality and tourism created one in five jobs in the last Parliament and is the fourth biggest industry in employment terms but there is more we can achieve with further support from the Chancellor. As an industry employing a large number of individuals earning more than national minimum wage and less than the proposed living wage, we have tried to have a constructive dialogue with HM Treasury on building towards the living wage without job losses. We were very surprised the Chancellor made this announcement without consultation. Despite the Chancellor trying to alleviate the pain with adjustments to corporation tax and employment allowances, these changes do not go far enough to reduce the impact on SMEs and mitigate potential job losses across the industry.
“On top of all these new pressures, our industry is at a serious disadvantage with other European countries where tourism VAT is on average 10%. We call upon the Government to lower VAT on accommodation and attractions to 5% to increase our market’s competitiveness and reduce costs to working families. A cut to tourism VAT could supercharge the economy with over £20 billion in foreign exchange earnings and domestic spending over the next 10 years.
“While we are analysing the potential impact of the Chancellor’s announcement, constructive dialogue with HM Treasury is now imperative to identify measures to counterbalance the Government’s ambitious agenda with the realities of running a high service and very low margin business.”