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Hospitality and Leisure: Comments from the 2020 Summer Statement

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We don’t normally see a summer budget statement, but hospitality & leisure businesses will be hoping for more of them, following the Chancellors Rishi Sunak’s announcements which should give the industry a much needed boost.

A number of new measures have been announced which come in to force shortly, including:

  • A reduction in VAT from 20% to 5% on food, accommodation and attractions from Wednesday 15th July 2020 for 6 months. The cut will apply to eat in or hot takeaway food from restaurants, cafes and pubs, accommodation in hotels, B&Bs. Campsites and caravan sites and will also impact attractions such as cinemas, theme parks and zoos
  • The introduction of a 50% discount on eating out. The Eat Out to Help Out deal will run for the whole of August and will apply to diners eating out Monday through to Wednesday. The scheme will provide a maximum discount of £10 per head.
  • To assist with retaining staff who have been on Furlough, the government will pay a bonus of £1,000 per employee for employees who remain in employment in January 2021.
  • The introduction of a £2bn kickstart scheme to create more jobs for your people. The fund will subsidise six-month work placement for people on Universal Credit aged between 16 and 24, who are at risk of long-term unemployment. The scheme could fund up to £5,330 for each eligible employee. The scheme will commence in August 2020 and run through to December 2021, with the option of being extended.

These announcements will present hospitality and leisure businesses with various actions that need to be taken within a short
period,

  • They will need to review and amend their accounting systems to ensure that VAT is accurately accounting for, including the treatment of any deposits received.
  • They will need to review their pricing structure and the impact of the VAT changes on these, updating menus, booking systems, websites etc.
  • Review of advance bookings/takings to agree any reductions in prices
  • Review any bonus or tips schemes in place to ensure these remain relevant with the changes announced.
  • In the past VAT has proved to be a cashflow benefit for a business and therefore businesses should consider the cashflow impact of these changes.
  • They will need to review staffing levels and look to maximise the use of the flexible furlough scheme, together with the kickstart scheme
  • Businesses will need to register for the Eat Out to Help Out deal, with the website going live on 13th July 2020.
  • Businesses will need to ensure they have the right systems and procedures in place to capture the discount and to claim the money back each week

Earlier this week the government announced a £10m kickstart tourism package, targeted at communities that depend on tourism. The package will provide small businesses with grants of up to £5,000 to help them adapt their businesses following Covid 19. The grant can be used for HR support or changes to internal systems and could therefore help with a number of the action points mentioned above.

The Hospitality & Leisure sector has been one of the most severely impacted by Covid 19, but hopefully these changes will help to see increases in trade and help with securing and creating employment.

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Posted in Blog, Hospitality & leisure

Dave Gosling - FCCA

Partner

To discuss the announcements made during the summer statement that may impact your hospitality and leisure business, contact Menzies Partner and H&L sector specialist Dave Gosling.