VAT cut for hospitality and tourism businesses extended until September, Sunak announces

150,000 businesses ‘need our support’, says chancellor

Rishi Sunak has announced the government’s VAT cut for the hospitality and tourism sectors will be extended for six months until the end of September.

Unveiling the measure, the chancellor said 150,000 businesses employing 2.4 million people “need our support” to protect jobs as the coronavirus restrictions are eased in the months ahead.

The government first announced the cut to 5 per cent last summer, applying to the hospitality industry, hotel and holiday accommodation and admission to certain attractions, as the national lockdown was lifted.

Before the reduction, which was due to end on 31 March, the sectors were subject to the standard rate of VAT — set at 20 per cent.

Speaking at the Budget, Mr Sunak added that when the reduction expires in September, “even then, we won’t go straight back to the 20 per cent rate”.

He added: “We’ll have an interim rate of 12.5 per cent for another six months; not returning to the standard rate until next year. In total we’re cutting VAT next year by almost £5 billion.”

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Under the government’s roadmap, hospitality businesses, including pubs and restaurants, will be allowed to reopen their doors for outside dining in April, before a full reopening in May.

Mr Sunak added that the 100 per cent business rates holidays in England will continue from April until June, telling MPs: “For the remaining nine months of the year, business rates will still be discounted by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open. A £6 billion tax cut for business.”

The chancellor said business rates holidays for the retail, hospitality and leisure sectors would also continue until the end of June, and would be discounted by two-thirds for the remaining nine months of the year.

The announcement comes after the Treasury confirmed the extension of the coronavirus furlough scheme until September, with employers being asked to pay contributions towards wages in the summer months.

More than 600,000 self-employed people excluded so far from the government’s support package will be able to claim direct cash grants, as the government’s self-employment income support scheme (SEISS) is extended to cover those who began working for themselves in 2019-20.