VAT cut for hospitality sector extended for six months, Rishi Sunak announces

Chancellor says 150,000 businesses will be helped

(Reuters TV)

The government’s VAT cut to help the hospitality sector during the coronavirus crisis is to be extended for another six months, the chancellor has announced.

Rishi Sunak told the House of Commons on Thursday that the temporary cut from 20 per cent to 5 per cent would continue until 31 March.

“The final step I'm taking today will support two of the most affected sectors, hospitality and tourism,” he told MPs.

"On current plans, their VAT rates will increase from 5% back to the standard rate of 20% on January 13.

"So to support more than 150,000 businesses and help protect 2.4 million jobs through the winter, I'm announcing today that we are cancelling the planned increase and will keep the lower 5% VAT rate until March 31 next year."

The VAT cut was introduced earlier this year by the government to help restaurants, pubs and hotels, who have been hit hard by the pandemic and its associated social distancing measures.

The tax on good and services is included in the prices displayed in shops and on menus. The 15 per cent cut applies to food and non-alcoholic drinks, accommodation and admission to tourist attractions, according to the Treasury .

Some firms have pocketed the saving to stay afloat, while others have passed the tax cut onto consumers in the form of lower prices to attract people back over the summer.

"The announcement of further restrictions was a significant hammer blow that will inevitably depress trading," she said in a statement following the VAT announcement.

"It was crucial that the chancellor delivered support today that specifically targeted the hospitality sector which has been hit harder than any.

"The chancellor has given us some reason to be positive again but we urge him to engage with the trade on specific measures to keep people in work.

"While some of these measures announced today will give businesses a future to shoot for and hope that they can begin to rebuild, we are still not out of the woods."