Summer budget 2020

Amongst the wonderful pieces contributed by members of different community bubbles, my travel experiences, and a bit of delving in to the past - you may be thinking: “what does the Summer Budget have anything to do with The British Bengalis platform?” I’m thinking the same thing. But, one thing I do know - the UK’s hospitality sector has been hard hit by the Covid-19 crisis and this budget attempts to make amends. If there’s one sector that British Bengalis are globally renowned for - it is hospitality. It’s definitely one of the many things we do very well and I thought we had to share our understanding of what has been announced.

what was annouced?

Rishi Sunak, the Chancellor of the Exchequer announced on Wednesday (8 July 2020) two key stimulus packages for the industry:

• A VAT rate reduction reducing VAT from 20% to 5% for certain foods and beverages.

• The ‘Eat out to Help Out’ food and drink discount scheme.

VAT reduction

Her Majesty’s Revenue and Customs (‘HMRC’ or also more commonly referred to as the ‘tax man’) published their guidance today (9 July 2020) on the temporary reduction to the VAT rate for the tourism and hospitality sector. For the hospitaltiy sector, the following will be eligible for the VAT relief between 15 July 2020 and 12 January 2021:

• “food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs

• hot takeaway food and hot takeaway non-alcoholic beverages..."

Food

For food, the reduced rate applies to businesses that serve food to the public on-premises such as restaurants, cafes, and pubs and includes hot takeaway food.

Beverages

On beverages, the reduced rate applies to non-alcoholic beverages consumed on-premises; but for takeaway drinks, the VAT relief appears to be restricted to only hot non-alcoholic beverages (i'm thinking coffees?).

what if i'm on the flat rate scheme?

At the time of publication, HMRC had not yet released any further guidance on the Flat Rate Scheme. However, I suspect that new temporary rates will be published in the coming days so please do keep a look out here.

'eat out to help out'

This is a novel Government backed scheme and will enable businesses such as restaurants, cafes, and pubs to offer a 50% discount (capped at £10 per person and only applies to customers eating and/or drinking) in the month of August on food and drinks they sell to incentivise customers to eat in at their establishment.

When will the scheme run and who does it apply to?

The scheme will run from 3 August 2020 to 31 August 2020, Monday to Wednesday. As per the VAT rate reduction, the scheme will only apply to food and non-alcoholic beverages, but unlike the VAT rate reduction, it will only apply to food and drink consumed on-premises.

How will the scheme operate?

1. Businesses will first need to register for the scheme by 31 August 2020 (registration opens on 13 July 2020).

2. The discount provided to customers then needs to be claimed (up to a maximum of £10 per person) by making a claim to HMRC for the discount they have provided to customers on food and drink sales made.

Although it’s not clear yet what level of detail HMRC will be expecting to see on a claim, it seems reasonable that they may be expecting to see ‘covers’ for the night; or even a detailed breakdown of the number of people eating per order.

Who can register for the scheme?

HMRC state that business can register if the business:

• “sells food for immediate consumption on the premises

• provides its own dining area or shares a dining area with another establishment for eat-in meals

• was registered as a food business with the relevant local authority on or before 7 July…”

Who cannot register for the scheme?

HMRC have restricted the following businesses from registering for the scheme:

• “an establishment that only offers takeaway food or drink

• catering services for private functions

• a hotel that provides room service only

• dining services (such as packaged dinner cruises)

• mobile food vans or trailers…”

I hope this report has been useful and please contact your business adviser for further technical clarification.