Summer Economic Update
The Chancellor delivered his Summer Economic Update today. In a significant move, the Chancellor has announced a temporary VAT cut from 20% to 5% for an array of goods and services provided in the leisure and tourism sector. These include:
- supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises; and
- supplies of accommodation and admission to attractions.
Further guidance on the scope of this relief will be published in the coming days. The reduced rate will apply from 15 July 2020 to 12 January 2021.
This is a welcome move for some of the sectors hardest hit by the Coronavirus and who will continue to struggle while restrictions remain in place. Furthermore, as the predominance of the services covered relate to the retail sector, the benefit will have a direct and immediate effect.
A number of measures have been in place for some time, including deferring £38 billion of VAT payments, providing importers with time to pay facilities, bringing forward the removal of VAT on e-publications and waiving VAT on Personal Protective Equipment.
Today's announcement will provide further assistance. Retail businesses may chose to use the reduced rate to lower prices (and therefore hopefully increase demand), to enhance their net takings, or a combination of both. Businesses issuing invoices will need to change their processes and contracts will need to be reviewed in order to establish when payments are due and whether those payments are inclusive or exclusive of VAT.
Whichever way, businesses should look at amending their systems and procedures early in order to ensure they are ready on 15th July.
Access the Summer Economic Update on the government website
here.
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