Following the Chancellor Philip Hammond’s first Autumn Statement, Dave Gosling – Partner and Head of Menzies Hospitality and Leisure sector team – has reviewed the announcement in line with their impact upon the UK Retail sector.
A fairly quiet Autumn statement this year from the Chancellor, in fact so quiet that he has decided not to have one next Autumn and instead move the actual budget to this date instead.
Before the Autumn statement, most hospitality and leisure businesses where hoping for a couple of early Christmas presents, with a reduction in VAT and a change to the business rates system.
Unfortunately, despite the lobbying and the fact that 22 EU countries have a reduced rate of VAT for hotels and 14 with a reduced rate of VAT for the hospitality industry, the Chancellor did not announce any change to the VAT rates for the sector. However there were a couple of changes announced to business rates, with rural rates relief to be increased to 100% which will assist many local pubs and restaurants and an increase in the transitional relief cap, meaning those facing rates increases in April 2017 should see a reduction in the expected rates increase.
Employer Cost Considerations
There were a couple of changes announced in relation to employees which businesses will need to budget for and make the necessary changes so that margins and profits will not be affected, these are:
- An increase in the National Minimum Wage from £7.20 to £7.50 from April 2017, giving some employees a pay rise of over 4%. In addition to this there will be the associated increase in Employers National Insurance Contributions and Employer Pension Contributions. For staff paid in line with the National Minimum Wage, this will result in an increase of over £500 a year per employee.
- The Chancellor also announced that thresholds for Employee and Employer National Insurance Contributions will be equalised from April 2017, again additional an additional cost per employee
The other main cost increase that will affect the sector was the 2% increase in Insurance Premium Tax from June 2017.
There was some good news in that the Chancellor announced that the planned reduction in the corporation tax rate to 17% in 2020 would still go ahead.
Research and Development
In addition to the above, the Chancellor announced £2bn per year by 2020 for research and development funding.
Most hospitality and leisure businesses will think this will not be relevant to them especially since only 1% of Research & Development claims have been made by Food & Drink businesses, however Menzies have recently published a report highlighting potential claims that could be made in the sector and businesses must ensure that they are maximising the claims available.
Find out more about the Menzies Hospitality & Leisure business services.
Get more input on the 2016 Autumn Statement implications for the Hospitality & Leisure sector by speaking to our sector team.