The Chancellor made his statement yesterday (8 July 2020) on the next phase of the government’s plan to address the economic impacts of the coronavirus outbreak. The proposed measures include support for the hotels and leisure sector, incentives for job creation and set out the phased end to the Job Retention Scheme. We await full details of the new measures.
The measures announced are designed to provide support in the medium term and the Chancellor confirmed that additional measures will be announced in the autumn to support the longer-term recovery through a Budget and Spending Review.
- Eat Out to Help Out: This scheme is designed to encourage people to get back out and into restaurants etc. The terms of the scheme are as follows:
- Restaurants etc will have to sign up to participate in the scheme. To be eligible they will need to:
- be registered as a food business with a local authority on or before 7 July 2020
- sell food for consumption on the premises
- provide a dining area (their own or shared)
- Mobile food vans, catering services for private functions and hotels that only provide room service will not be eligible.
- Each diner is entitled to a 50% discount of up to £10 per head on their meal at any participating restaurant, café, pub or other eligible food service establishment.
- The discount is not limited to single use so it can be used multiple times by diners.
- The scheme will be available from 3 August to 31 August and valid on Monday to Wednesday on any eat-in meal (including non-alcoholic drinks).
- Participating restaurants will be fully reimbursed by the government for the 50% discount and the Chancellor confirmed that restaurants can expect to receive reimbursement from the government within 5 days of submitting the claim.
- Restaurants etc will still have to pay VAT based on the full amount of diners’ bills.
With employees starting to return to their place of work, this scheme should be particularly helpful to the lunchtime trade of restaurants and cafes etc which have been severely affected by people working from home during the outbreak.
HMRC has backed the introduction of the scheme commenting that there is a sound policy rationale for targeting intervention in this sector. We hope that this will encourage the government to do more to support this sector through the coronavirus crisis and beyond.
HMRC has confirmed that from 13 July 2020 a dedicated phoneline and webchat will be available to businesses to assist with registration and general queries.
- Temporary VAT cut for the hotels and leisure sector:
- From 15 July 2020 to 12 January 2021 the rate of VAT on supplies of food, non-alcoholic drinks (both in an eat-in setting), accommodation and admission to attractions will be reduced to 5%. The effect of cutting the applicable VAT rate is to lower the cost for the end consumer. The aim is to encourage people to get out and spending money in the sector again now the lockdown conditions are being relaxed.
- The current rate of VAT charged on hospitality sector supplies is 20%. This has long been regarded as a barrier to the growth and prosperity of the sector. It has a particular impact on restaurant etc businesses as the supply of take-away food in most cases is zero-rated. The Cut Tourism VAT campaign, supported by UK Hospitality amongst others, has long campaigned for this measure. The UK is in the minority of European countries that does not have a reduced rate of VAT for the hospitality sector. A reduced VAT rate has been proven to stimulate tourism in the countries in which it has been introduced. Hopefully this measure will encourage UK residents and tourists alike to make the most of the UK hotel and leisure sector this summer.
- We are awaiting guidance from HMRC to confirm the full scope and conditions of the VAT rate cut.
- Coronavirus Job Retention Scheme (“CJRS”): From 1 August 2020, the support offered to employers by the CJRS will begin to wind down and the Chancellor confirmed that the scheme will definitely cease at the end of October 2020. However, he also announced a number of new schemes to encourage employers either to retain currently furloughed employees or to create new jobs, which could see some take up from hotel and leisure sector businesses:
- Job Retention Bonus: To encourage employers to return those currently furloughed to work, the government will (subject to certain conditions) pay them a one off bonus of £1,000 for each returning employee who remains continuously employed through to the end of January 2021. Payments will be made from February 2021. We await full details of this scheme, including confirmation of whether the bonus will be taxable. The aim is obviously to discourage redundancies and incentivise employers to take a longer term view. However, for many employers experiencing serious cash flow problems, a relatively nominal payment in February may not be enough to avoid difficult decisions being made before then.
- Kickstart Scheme: a £2 billion fund will be created to fund the creation of work placements for those aged between 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment.
- Apprentice scheme: Employers in England will receive £2,000 per new apprentice aged under 25 hired and £1,500 for each new apprentice over 25 hired, from 1 August 2020 to 31 January 2021.
- Sector-based work academies: An additional £17 million has been pledged to triple the number of sector-based work academy placements in England.
As noted above, we are waiting on guidance in relation to the majority of the schemes and it will be interesting to see the details of the proposed schemes once available. We will provide further updates in due course.
Initial guidance published today (9 July 2020) on the Eat Out to Help Out scheme can be found here.