Some relief for hospitality with furlough extended and VAT kept at 5%


Chancellor Rishi Sunak’s set out his plans for economic recovery today in his Budget saying the UK Government will do “Whatever it takes to support people and businesses through this moment of crisis”,  and the response from hospitality organisations has been broadly positive. However, although he awarded further start-up grants of up to £18K for English businesses – it will be up to the Scottish Government to decide what they will issue to Scottish businesses with the extra £1.2bn they have been allocated to spend supporting Scottish businesses.

The main Budget points are:

  • VAT remains at 5% until the end of September and then goes to 12.5%
  • Furlough has been extended until the end of September with business contributing 10% in July,  and 20% in August and September.
  • A new Recovery Loans Scheme will replace CBILs and Bounce-back loans.  It offers £25k – £10m to businesses, with the UK government providing an 80% guarantee to lenders.  You can apply until the end of the year.
  • 130% tax relief for those that invest in their businesses
  • alcohol duty and fuel duty has been frozen
  • Apprenticeship funding doubled to £3K.

UKHospitality Chief Executive Kate Nicholls said,  “The Chancellor has listened to the concerns of the hospitality sector. Details are yet to be pored over but it looks like crucial support will help businesses at a critical time.

“While it would have been better to have extended the 5% rate further, it is now vital that the Government looks at introducing the interim rate for hospitality on a permanent basis. It would be a positive legacy of an otherwise dreadful year for our sector. A permanent reduced rate of VAT for hospitality would redress the unfair tax imbalance that our businesses have faced for too long and make us internationally competitive.”

Marc Crothall, Chief Executive of the Scottish Tourism Alliance, said, “Overall, it’s a supportive budget but it is absolutely vital that businesses who have been hardest hit and will be last to open are given a realistic and supportive timescale to enable sustainable recovery for the sector.

“The extension of furlough until the end of September will be welcomed by businesses across the sector. However, furlough still comes at a cost to business and it will take some time for many businesses to start to trade viably again and meet the most basic costs.  I’ve spoken to a number of sectoral associations over the past week who have told me that businesses simply don’t have the cash reserves to get them beyond Easter; it’s therefore crucial that a robust and tapered financial support package is delivered quickly to the businesses who need it the most in addition to the packages of support announced today.

“The STA has campaigned relentlessly along with UKHospitality and other national tourism bodies for a long term reduction in VAT and today’s announcement that the reduced 5% rate of VAT will be extended until the end of September to 12.5% for a further 6 months is good news. The industry had hoped that the 5% rate would have been extended well into 2022 to allow businesses more time to recover and have the breathing space needed to meet the substantial costs of loan repayments and other significant costs which are looming on the horizon; we will continue to make the case for VAT not returning to 20% beyond March next year to stay competitive as a destination.

“The announcement of new recovery loans with 80% guarantee replacing the CIBLS loan will also be of interest and welcomed by some in the sector, but it is the continued grant support that is needed by businesses to be able to off-set fixed costs and help finance the restart of business trading. I know from the conversations I have had with many different types of tourism businesses large and small across all sectors in Scotland, that it is this additional grant support that is needed with utmost urgency to help them restock and restart.

Stephen Gow, general manager of The Chester Hotel in Aberdeen says, “Any form of support for the hospitality industry and the individuals employed across such a diverse sector has to be welcomed.

“The continuation of the VAT reduction to 5% for six months to the end of September is a welcome measure and the proposed staged increase of VAT will be of assistance. An extension of the 5% until at least the end of the year would have given businesses a more stable platform from which to plan operational and financial recovery.

“Extended furlough will allow us, as business returns, to phase the return of our team to the business to meet its needs which will be helpful.

“It’s good to see the Chancellor acknowledging that the hospitality sector has been badly hit and will reopen with more restrictions and we await details on the new Restart grants for English hospitality businesses which the Chancellor has said will be up to £18k. Scottish businesses need this to be echoed in Scotland.”

While Dayalan Nayager, Managing Director, Diageo Great Britain commented, “We thank the Chancellor for providing much-needed stability by freezing alcohol duty. The last year has been incredibly tough and today’s decision, along with other measures to help the trade, gives the industry confidence to meet the ongoing challenges in these critical last months before reopening. Commitments such as Diageo’s £30m, to help pubs and bars operate safely through our Raising the Bar, will give even further assurance. We now look ahead to the Alcohol Duty Review and welcome the opportunity to work with Government to bring greater fairness to the duty system and spirits producers across the UK.”

Emma McClarkin, Chief Executive of British Beer & Pub Association, said, “Overall, this is a good Budget for pubs and breweries in the short term, reflecting just how vital they are to the social, cultural and economic fabric of our communities. 

“However, this is just the start of the journey on the hard road to long-term recovery for our sector. The Chancellor has made it clear today he recognises the vital role local pubs play in their communities. Now he must continue that commitment by ensuring Britain’s pubs and breweries are supported in the long term. This should start by extending the VAT cut on hospitality to all drinks until at least the end of the year. We also need a fundamental reform of VAT, business rates and beer duty to ensure that the thousands of pubs and breweries across the UK can thrive and help drive the social and economic recovery we urgently need.”