The Chancellor Rishi Sunak has announced a temporary cut in VAT on hospitality from the current 20% to 5% as part of the emergency package of measures delivered to the House of Commons today.

While rural businesses including pubs, restaurants, holiday accommodation and visitor attractions, as well as to the ancillary services that support them, have been badly hit by the COVID-19 pandemic, the recent easing of the lockdown and likely popularity this year of staycations, combined with the VAT cut, might help with a recovery in the rural economy.  

Given that VAT is the third biggest tax generator after Income Tax and  National Insurance, raising some £137billion of tax revenue a year, any cut in the rate of the tax, even a carefully targeted one, will hit the Treasury hard (estimates are that it will cost the Treasury at least £4billion). So such a significant cut in the rate of VAT it is a measure of how seriously the Treasury is taking the need for an economic stimulus.  

The café, pub and restaurant industries are to receive another targeted boost in August by way of the “eat out to help out” discount of up to £10 per person off meals and non-alcoholic drinks during August.  Whilst there may be an element of the gimmick to that particular announcement, and the full details of the VAT cut are yet to be clarified in detail, let's hope that these announcement encouraged people to take even more advantage of the UK’s unique rural hospitality and leisure offerings.

Please look out for further communications on the implementation of the new re-opening rules from our specialist food & beverage team.