Autumn Budget 2021

Disappointment about 12.5% VAT not mentioned in Budget

By Nikkie Thatcher

- Last updated on GMT

Government announcement: the Budget was announced in Parliament today (image: Getty/Gary Yeowell)
Government announcement: the Budget was announced in Parliament today (image: Getty/Gary Yeowell)

Related tags Vat Government Legislation Sacha Lord

Chancellor Rishi Sunak made no reference to keeping the 12.5% VAT rate permanently at his Budget today (Wednesday), suggesting the rate will go back to 20% next year.

Keeping the 12.5% VAT rate was the top priority for operators​, according to a snap poll of 55 operators conducted by The Morning Advertiser​ with almost half (47%) of the votes.

This was followed by more than a quarter (27%) saying a reform of the business rates system would help most.

Some 15% voted in favour of a lower level of excise duty, 5% wanted a beer duty freeze and a further 5% said “other”.

Weight of increase

On the Budget announcement, Greater Manchester night-time economy adviser and operator Sacha Lord: ​"I am disappointed there was no reference to extending the current 12.5% VAT rate for hospitality which will return to 20% in April next year and see a surge of operators closing under the weight of the increase.

"Despite outward appearances and busy nightlife scenes across the UK, the sector is still struggling. Operators will take at least three years to recover from this pandemic and many remain in very precarious financial difficulties which could see them go under at any moment.”

He went on to warn how increasing costs would see shuttering across the sector and the impact on consumer confidence.

Financial dire straights

Lord added: "Rises in inflation, supply chain issues and VAT increases are all burdens which are brutally impacting on an already beleaguered sector, and combined will result in venues closing, more staff being made redundant and tax bills left unpaid through bankruptcy.

"On top of this, reports of the impending Plan B measures are also affecting confidence. One thing we have continually asked for throughout this crisis is clarity and advanced notice.

“Venues are only just getting back to their feet, with the majority still in financial dire straits. To tease them with uncertainty over vaccine passports and the threat of working from home, which will undoubtedly see an exodus of customers for operators who rely on office workers for business, is yet another disservice to the sector.

"The hospitality industry is vital to the UK's recovery and growth, with nightlife alone representing £36.4bn to the economy pre-pandemic. There is not one operator in the hospitality industry who hasn't been negatively impacted by the past 20 months, and we have seen more than 86,000 employees leave the industry. It's imperative now that the Government continues to support the sector as it recovers."

Lord did however, welcome the discount to business rates for the trade and the changes to alcohol duty.

He said: “Finally, the Chancellor has recognised the strength and importance of the hospitality sector. I am pleased to see the much-needed business rate discount and the introduction of tax reforms on alcohol, both of which will go far in helping hospitality operators, especially wet-led pubs, maintain a steadier footing while they recover.”

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