VAT on food, accommodation and attractions will be cut from 20 per cent to 5 per cent in a bid to restart demand hit by Covid-19.
Chancellor Rishi Sunak has announced today that the cut will apply for six months, running from next Wednesday to January 12.
Sunak described the measure as a “£4bn catalyst” for the leisure and hospitality industries.
150,000 businesses and the 2.4m workers they employ will be impacted, he said in his summer economic statement today.
Sunak noted that 1.4m of those workers in hospitality had been placed on furlough – the highest proportion of any sector – as 80 per cent of businesses temporarily stopped trading in April when lockdown was introduced.
“The best jobs programme we can do is to restart these sectors and get our pubs, restaurants and B&Bs bustling again,” Sunak said.
“I know people are cautious about going out, but we wouldn’t have lifted these restrictions if we didn’t think we could do so safely…If we follow the guidance we can all enjoy summer safely.”
“We need to give these business the confidence to know that if they open up, invest in making their premises safe and protect jobs, demand will be there, and be there quickly.”
The standard VAT rate is currently 20 percent in the UK. It was temporarily cut in the wake of the financial crisis in 2008 and a variety of other countries have used it to stimulate their economies during Covid-19.
Reports surfaced in June that Sunak was considering a move to slash VAT, with former chancellor Alistair Darling arguing this could be cut to as little as 5 per cent.
Within the advice industry, there remains fierce debate about how it should be applied to discretionary fund management fees.
