Winter Economy Plan

VAT cut extension ‘misses golden opportunity to include alcohol’

By Nikkie Thatcher

- Last updated on GMT

Reduction extension: the VAT cut from 20% to 5% will continue until March, the Chancellor announced
Reduction extension: the VAT cut from 20% to 5% will continue until March, the Chancellor announced

Related tags Vat Tax Legislation Chancellor Government

The Chancellor’s announcement of an extension of the 15% VAT cut on food, soft drinks and accommodation has been criticised for excluding wet-led pubs.

Read more about the measures announced by the Government here:

In the House of Commons today (Thursday 24 September), Rishi Sunak laid out the Winter Economy Plan​, which included the VAT reduction from 20% to 5% continuing until the spring for hospitality businesses.

He said: "On current plans, their VAT rates will increase from 5% back to the standard rate of 20% on 13 January 2021.

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

However, trade voices have voiced their frustration at the reduction not including alcoholic drinks.

Golden opportunity

British Beer & Pub Association boss Emma McClarkin said: “The VAT cut extension on food and soft drinks will help our sector and it is great to see the Chancellor answer our urgent call for this. However, the extension is only for six weeks and only takes us through to the end of the current restrictions – it needs to be much longer to help our sector recover. 

“Furthermore, where those pubs and bars that are not food focused are concerned, the Chancellor has missed a golden opportunity to extend the VAT cut to include alcohol. 

The extension of the VAT cut was labelled “absolutely critical” by UKHospitality (UKH) chief executive Kate Nicholls.

She added: “UKH had pushed hard for it, so it is great to see the Government taking note of our major concerns about recovery into 2021, though this must be extended further.”

The trade needs further support in other areas, according to Campaign for Real Ale (CAMRA) chairman Nik Antona.

He said: “What the hospitality industry needs is a support package including an extension of the business rates holiday, grants rather than loans, consideration of a differential rate of duty on draft beer served in pubs and real support for wet-led pubs which cannot benefit from the VAT cut extension.”

Business recovery

Long-term support is required for the industry to help recovery, St Austell Brewery chief executive Kevin Georgel said.

He added: “We welcome the Chancellor’s extension of the VAT reduction until March. However, if the new restrictions last up to six months, this support must be extended much further into next year to help hospitality businesses recover.

“Furthermore, while the extension of the VAT cut offers some breathing room for our sector, it does not apply to beer or alcohol sales so is not available to wet-led pubs that don’t serve food. Cutting beer duty would offer these much-loved community hubs the urgent support they need, to keep their doors open.”

The Chancellor also announced businesses that deferred VAT bills will be given more time to repay through the New Payment Scheme, providing the option of paying the bill back in small instalments.

Instead of paying back a lump sum at the end of March 2021, businesses can make 11 smaller interest-free payments during the 2021-22 financial year.

Self-assessment taxpayers will also be eligible for a separate additional 12-month extension from HMRC on the Time to Pay self-service facility.

This means payments deferred from July 2020 and those due in January 2021 will now not need to be paid back until January 2022.

UKH’s Nicholls said: “The announcement of longer tax deferrals and the option of longer loan repayments should deliver some much-needed breathing room for employers.”

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