Chancellor expected to announce VAT cut while Treasury revisits coronavirus support loans

Chancellor Rishi Sunak is expected to announce a temporary VAT cut for hospitality businesses as part of his summer statement on Wednesday.

According to The Times, Sunak plans to temporarily cut VAT for pubs, restaurants and cafés to help to protect jobs in the sector, which only reopened in England and Northern Ireland last week.

Meanwhile, The Telegraph reports that the Treasury is considering ways of making it easier for businesses to access coronavirus support loans after the European Commission last week relaxed state aid rules, which could allow UK firms that were previously rejected to reapply.

Around 120 hospitality industry leaders have written to the prime minister urging the government to commit to an ambitious programme of business support and investment, including a temporary VAT cut, to stimulate the revival of the sector.

According to trade body UKHospitality, sales across the sector are expected to be 56% lower than last year, reducing revenues by £73.4b, and half of businesses do not expect to break even until the end of next year.

The letter calls for the deferral of July tax liabilities; a hospitality, leisure and retail property ‘bounce back grant'; temporarily reducing VAT to 5% for hospitality; full furlough to the end of October; and a business rates holiday to March 2022.

UKHospitality chief executive Kate Nicholls said: "Our sector has been a high-profile casualty of this crisis and businesses are only now just beginning to reopen.

"For those businesses that have survived, the hard work begins now. We cannot assume that we are now in the clear just because our doors are open again. Many businesses have taken huge hits and hundreds of thousands of jobs are still in the balance.

"If we want to make a real success of this reopening, keep businesses alive and jobs secure, then the government needs to provide support. Support from the government has been extremely helpful in keeping venues afloat and it has saved jobs. There is no possibility of stopping now, though. Anything less than a full show of support from the government risks undoing much of the good work that has already been done and will cause lasting damage to employment and the UK economy.

"We urge the government to act decisively and positively to give hospitality the best possible chance of not only surviving the crisis but thriving in the aftermath."

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