The Chancellor’s VAT cut for businesses in the hospitality and leisure sectors will be extended until the end of March next year, it has been announced.

The relief – designed to give businesses in the most impacted industries “confidence” to continue trading – was scheduled to end on 13 January 2021.

The extension means that hundreds of thousands of businesses in the hospitality and leisure industries will continue to benefit from a 15 per cent cut in VAT on most food products, beverages and services sold from hotels, restaurants, pubs, bars, and takeaways.

This includes certain supplies of hospitality, hotel and holiday accommodation and products, including food and non-alcoholic beverages sold for on-premises consumption and hot takeaway food and non-alcoholic beverages.

The five per cent reduced rate also applies to admissions to attractions that are not eligible for the cultural VAT exemption, such as theatres, circuses, fairs, amusements parks, concerts, museums, zoos, cinemas and exhibitions.

The announcement has been welcomed industry-wide, with two in five hospitality and leisure businesses recently stating that the VAT cut has “kept their business afloat”.

Commenting on the measure, UKHospitality Chief Executive Kate Nicholls said: “Looking ahead, the extension of the VAT cut was absolutely critical. UKHospitality 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.”

Elsewhere, businesses who deferred VAT bills will be given “more breathing space” to pay back the accumulated liabilities.

The initiative, known as the New Payment Scheme, will give the half a million businesses who deferred tax bills the option to pay them back in small instalments, rather than as a lump sum in full at the end of this tax year.

Highlighting the initiative, Ms Nicholls added: “The announcement of longer tax deferrals and the option of longer loan repayments should deliver some much-needed breathing room for employers.”

For VAT advice specific to your sector, please get in touch with our expert team today.

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