VAT RATES TO CHANGE AGAIN AND AGAIN

EIGHT MORE MONTHS BEFORE RETURN TO NORMAL – TIME TO PAY IT FORWARD

July 2020 saw the almost unprecedented situation of VAT rates being slashed to 5% within the hospitality and leisure sectors. This move by the Chancellor, was initially set to run until mid-January, however, was extended to the end of March, mainly due to continued lockdowns, and once again until the end of September 2021.

With an interim bump in rates returning to 12.5% in October until the end of March 2022 and then back to the pre-Covid rates of 20%.

VAT is the third-largest generator of revenue for the Government, so on the face of it a huge deduction, the only comparable one, almost fifty years ago in the financial crises of the mid 1970s, but in actuality, with the number of businesses closed or partially operating the effective loss to HMRC is not that big, (if an estimated £3bn) is not that big, compared to the other Covid related expenditure and support measures?

For many hospitality businesses, they decided not to pass on the reduction to their customers and instead retain the additional bonus revenue, however, we are aware of some Council operated concessions, chose to pass on the reduction as a saving to their customers and it was widely reported that leading hospitality chains and Quick Service Restaurants did the same.

Due to demand, many holiday accommodation operators have also decided to hold on to this windfall, through their pitch fees for caravans and tents, even though they have not been as badly affected as hotels and attractions, let alone the majority of late-night businesses that have been closed since last March.

So, as we move into the autumn and winter months, will more businesses retain the additional margin or choose to reward their customer base?

The Chancellor’s original stated aim was to protect jobs and stimulate the beleaguered hospitality and leisure sectors, by allowing businesses to offer discounts to customers, but further Covid restrictions and lockdowns, prevented that happening, hence the extensions.

Is it time to pay this forward as intended, especially, as there will many no longer receiving furlough payments?

What was on the face of it a very good intention and stimulus, really hasn’t proven to be effective at all.

For the businesses receiving this benefit there are two rate changes between now and April 2022, is this something that takes you hours to do or does your EPOS system supplier do this for you automatically or a chargeable event?

Have the discounted rates been of benefit to your business and have you passed on any savings to your customers?

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