Reduction in VAT rate to 5%– do I have to pass on the savings to my customers?

In a measure to encourage people to support the beleaguered leisure, tourism and hospitality sector, the Chancellor Rishi Sunak has announced a temporary VAT rate of 5% which will apply to food and non-alcoholic drinks from restaurants, pubs, bars, cafés and to hot take-away food. The measure also applies to supplies of accommodation and admission to attractions across the UK. The reduced rate came into effect from today, Wednesday 15 July, and will continue until 30 September 2021.

Do I have to pass on the VAT rate reduction to the customer?

This is the most common question asked by our clients.  The simple answer for most hospitality and leisure businesses is no, you do not have to, as most businesses in these sectors  advertise their services at the price they are sold to the customer, a price which will include VAT if any is payable to HMRC.

You may consider using the reduction in the VAT rate as an opportunity to reduce your prices if you feel you are operating in a price competitive market. However, where the market price for your products remains unchanged this could perhaps be seen as a temporary way of retaining a larger element of the margin and repairing your businesses finances.

Fact sheet

We have created a fact sheet which sets out the announcements and includes information you need to consider which relate to the changes.

Video

Our Indirect Taxation Partner, Jonathan Main, recently ran an online seminar focussing on these changes.  The fact sheet also contains a link to a recording of the seminar which can be watched in its entirety.

Accounting software

Our dedicated digital services advisers can help you make the necessary adjustments in your accounting software to ensure you are correctly recording your transactions.  Please get in touch if you need any support at info@mooreandsmalley.co.uk.

Contact us

If you have any questions in regards to the above content, please contact Colin Johnson at 01539 729727 or email colin.johnson@mooreandsmalley.co.uk

Summer Economic Update – what is the impact on the leisure and tourism sector?

The leisure and tourism sector received some welcomed support measures from the Government in the July Economic Update. Rishi Sunak revealed some new initiatives to help boost customer demand as lockdown measures are eased and businesses start to reopen. 

The main headlines were:

Eat Out to Help Out scheme

The Eat Out to Help Out scheme will entitle diners a 50% discount, capped at £10 per head, on eat-in meals in participating restaurants. The scheme will apply to meals taken on Mondays to Wednesdays throughout August, and will include the cost of non-alcoholic drinks. Participating restaurants will be reimbursed by the government for the 50% discount.

We await detail on how VAT will be accounted for on the discount.

A temporary cut in VAT

From 15 July 2020 to 12 January 2021, the rate of VAT will be reduced from 20% to 5% on food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.

Over the same period, the VAT will be reduced to 5% on tourist accommodation and attractions including cinemas, theatres and zoos.

Our VAT Partner, Jonathan Main, filmed a webinar discussing these changes which you can watch here. We have also developed a factsheet detailing the ways in which businesses can prepare for a VAT cut rate and the key points to consider.

There were also numerous measures to help employers:

Job Retention bonus

The government will make a £1,000 payment to businesses for every furloughed employee that they bring back to work. To qualify, the employee must be continuously employed until 31 January 2021 at a wage of at least £520 per month. Payments will be made from February 2021. It is unclear whether employees will qualify if they have already returned to work, and further detail will be announced by the end of July.

Kickstart Scheme

The government will fund the cost of wages of newly created jobs for 16-24 year olds who are on universal credit. The subsidy will cover 100% of the national minimum wage plus NIC and auto enrolment pension contributions, for a six-month period.

Traineeships

The government will pay a £1,000 subsidy to businesses who provide young trainees with work experience. These will be offered for 16-24 year olds with Level 3 qualifications and below.

Apprentices

The government will pay £2,000 to employers in England for each new apprentice they hire aged under 25, and £1,500 for apprentices aged 25 and over. The payments will be made for apprentices hired from 1 August 2020 to 31 January 2021.

Further details

For details of other measures that were implemented in the Update, please visit our dedicated Hub page.

Contact us

We will release more information as they are revealed. If you would like further information please contact Colin Johnson.

Summer Economic Update

Summer Economic Update

8 July 2020

The key points and changes from Rishi Sunak’s summer statement

Summer Economic Update

The 2020 Summer Economic Update is unique for both its timing and its focus on what measures will be implemented to help the economy bounce back from the impact of Covid-19.

Summer Economic latest updates

Our new blog details the changes from a Tax perspective, including VAT, Eat Out to Help Out scheme, Job Retention bonus and much more.

This easy to read infographic summarises the key points from the recent economic update.

Tony Medcalf Video Review

Tony Medcalf, head of Tax gives a short five minute overview of what the Summer Economic update means for you and your business.

Sector specific news

Some of the measures announced yesterday directly impacted the leisure and tourism sector. Here is our overview of what it means for businesses operating in the sector.




Summer Economic Webinar

Professor Joe Nellis, Global Economist from Cranfield University will be providing his view on the future outlook for the UK and global economy post-Covid-19, and also the longer term impact of the Government’s unprecedented stimulus packages. He will also be taking live questions afterwards.

Summer Economic VAT Update Webinar

In our latest VAT Webinar, Jonathan Main analyses the recent Summer Economic Update from Rishi Sunak, focusing on how the update mainly affects the Leisure and Tourism sector. As well as other pressing VAT issues and news including, Time To Pay (TTP), Trapped VAT, VAT Accruals, Bad Debt Relief and much more.

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Rishi’s Summer Statement

It is a sign of these unusual times that the Chancellor of the Exchequer has made more Financial Statements in four months than most Chancellors make in their full term of office. And in today’s financial statement, the measures announced by Mr Sunak were more dramatic than we would normally see in a full Budget.

The Chancellor’s focus was on jobs, and he made a series of
announcements designed to minimise unemployment when the furlough scheme ends
at the end of October.

We summarise below the main changes that will be of
relevance to businesses and charities.

VAT

From 15 July 2020 to 12 January 2021, the rate of VAT will be reduced from 20% to 5% on food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.

Over the same period, the VAT will be reduced to 5% on
tourist accommodation and attractions including cinemas, theatres and zoos.

Eat Out to Help Out scheme

The Eat Out to Help Out scheme will entitle diners a 50%
discount, capped at £10 per head, on eat-in meals in participating restaurants.
The scheme will apply to meals taken on Mondays to Wednesdays throughout
August, and will include the cost of non-alcoholic drinks. Participating
restaurants will be reimbursed by the government for the 50% discount.

We await detail on how VAT will be accounted for on the
discount.

Job Retention bonus

The government will make a £1,000 payment to businesses for
every furloughed employee that they bring back to work. To qualify, the
employee must be continuously employed until 31 January 2021 at a wage of at
least £520 per month. Payments will be made from February 2021. It is unclear
whether employees will qualify if they have already returned to work, and further
detail will be announced by the end of July.

Kickstart Scheme

The government will fund the cost of wages of newly created
jobs for 16-24 year olds who are on universal credit. The subsidy will cover
100% of the national minimum wage plus NIC and auto enrolment pension
contributions, for a six-month period.

Traineeships

The government will pay a £1,000 subsidy to businesses who provide
young trainees with work experience. These will be offered for 16-24 year olds
with Level 3 qualifications and below.

Apprentices

The government will pay £2,000 to employers in England for
each new apprentice they hire aged under 25, and £1,500 for apprentices aged 25
and over. The payments will be made for apprentices hired from 1 August 2020 to
31 January 2021.

Stamp Duty Land Tax

From 8 July 2020 to 31 March 2021, no SDLT will be payable
on residential property purchases up to £500,000. This measure applies to
England and Northern Ireland.

Green Homes Grant

The government will introduce a Green Homes Grant to subsidise
two thirds of the costs incurred by homeowners and landlords on making their
properties more energy efficient. The grant is capped at £5,000. For the lowest
income households, the scheme will fully subsidise these improvements, up to
£10,000 per household.

What next?

The Chancellor promised a Budget and Expenditure Review in November,
and stated that he wanted to put back the nation’s finances on a “sustainable
footing.” Whether this translates into tax rises in the short term remains to
be seen.

The Chancellor has previously signalled that he wants to
review the tax landscape for self-employed workers. The launch of the
Coronavirus Job Retention Scheme highlighted to Mr Sunak the difference in the
tax and NIC treatment of employed and self-employed workers, together with the system
of  taxation of dividends which is seen
as anomalous in certain quarters. He had nothing further to add to the subject
today, but a wide-ranging review would seem to be on the cards.

Calls have been made for a Wealth Tax by the Shadow
Chancellor, Anneliese Dodds. It is not clear how much tax would be raised by
such a measure, nor whether it would be embraced by Mr Sunak.

Holiday sector could benefit from ‘staycation’ boom

The holiday park and caravan sectors have the potential to benefit from a possible ‘staycation’ boom in the UK – if they approach the opportunity correctly.

Adam Parton, partner at MHA Moore & Smalley, said if lockdown measures continue to ease, there will be opportunities for leisure facilities which can offer safe holiday destinations to British tourists.

Adam, an advisor to tourism businesses across the region, believes holiday and caravan parks could potentially benefit thanks to the amount of green spaces available at such destinations and the relative lack of shared spaces. Likewise, he also expects a resurgence in ‘glamping,’ tent and cottage holidays for the same reasons.

However, Adam warns that to attract customers, these destinations will need to go out of their way to showcase how they are ensuring visitor safety – including such methods as a cleanliness rating.

He said: “The leisure industry is planning for an easing in the lockdown rules to allow for UK holidays to take place, possibly from July 4.

“There is clearly some uncertainty over how this year will play out, but we are certainly expecting domestic tourism to bounce back strongly in 2021, so the next few months will be a way for the sector to at least dip its feet in the water and begin to understand what works and what doesn’t.

“Organisations including the BHHPA (British Holiday Home Parks Association) are lobbying the Government hard to illustrate the safe options for holidaymakers within the UK, pointing out that outdoor activities are already regarded as safer – ideal for holiday parks, caravans and camping facilities.

These kinds of destinations may be able to illustrate safe reopening quicker than hotels, for instance, and we’ll likely see them become opportunities for family and extended families – depending on how far the lockdown is relaxed – to get together.

A lot will depend on how these facilities can be opened safely – how they can create and maintain social distancing and how this will affect communal areas and the safe functioning of onsite facilities such as shops, cafes and washrooms.

I think we will begin to see tourists interested in knowing these details in the same way they would previously have looked at what leisure facilities were available, and whether there was onsite WiFi.

Adam said that many businesses will already have plans in place for reopening safely, but will be looking to the Government for guidance.

Currently, July 4 is the earliest likely date for reopening of campsites and similar facilities, but only if the Government’s tests have been met regarding factors including the numbers of Coronavirus infections and testing rates.

Adam said: “If it is safe to do so, these facilities should be opening when they can, to provide employment, support the companies which operate them, and to give the UK population the chance of a break from the current situation.

“Now that the lockdown has begun to ease somewhat, we will be watching with interest to see how the situation progresses over coming weeks.”

For further information on the content of this blog, please contact Adam Parton on 01524 62801 or email adam.parton@mooreandsmalley.co.uk

What can I do to mitigate the risk to my business risk from Coronavirus?

The UK is only just starting to feel the effects of the global Coronavirus outbreak and it is very difficult to foresee how this will develop over the next few months, however, businesses should start to consider the potential impact and how they can mitigate any negative effects.

Leisure and tourism businesses are particularly likely to see a direct impact from the outbreak due to them dealing direct with the general public, so, it is important to plan for the potential negative consequences that may arise in the short term but also look at how to potentially benefit as time progresses.

A sensible starting point would be to either prepare or update your cashflow forecast for the next six months, thinking carefully about the income you are predicting in this period. This will indicate what actions you need to take; if it appears that cashflow is becoming strained during this period then you could consider the following actions:

  • Talk to your bank and alert them to your concerns and ask what assistance they are able to give, which may form either a capital repayment holiday for loans or increased overdraft facilities.
  • Talk to other finance providers, such as credit card providers, asset finance providers etc and see whether there is the option of reducing or delaying payments.
  • Approach major trade related creditors and see what flexibility they may have in terms of reducing or delaying payments
  • Open dialogue with HMRC regarding deferring tax payments that may be falling due, perhaps splitting your quarterly VAT bills into 3 monthly payments.
  • Review your terms of business in relation to the sales you make to your customers and ensure that your staff are fully aware of what they say to ensure that refunds are not issued for cancellations if your terms do not offer refunds.
  • Look at your insurance policy carefully, are you insured for any business interruption that may be caused?
  • Think about what benefit you can derive from the situation, for example, if you are selling UK based accommodation, can you drive demand from people who are may be cancelling overseas holidays?
  • Consider your stock levels carefully, do you need more or less of certain stock?
  • Think carefully about your investment plans, do you still want to follow your original plans or reconsider?
  • Look carefully at your sick pay and absence policies for your staff. Put together a plan of how you could ask your staff to work from home if they need to self-isolate, this might work for any finance and admin staff but naturally will not be possible for front of house and kitchen staff.
  • Consider how you will be able to continue to operate if you were to have significant levels of staff absence and sickness.
  • Enforce stringent hand washing policies to keep staff and customers as safe as possible.

Government support

In light of the current situation, the Government has announced a package of support for businesses ranging from supporting SMEs with payroll costs to the creation of temporary loan schemes. Summary of the main support packages announced to date.

The picture is ever changing, and it isn’t clear how matters will develop. It may not be necessary to implement any changes at this time; however, we would always advocate considering the potential impact on your business and where applicable having some exploratory conversations as noted above as soon as is possible. If you would like further advice on the above, please do not hesitate to get in touch with Colin Johnson.

National Minimum wage compliance

All employees over the school leaving age in the UK need to be paid over the National Minimum Wage (NMW). The hourly wage depends on the age of the employee and for over 25’s is currently £8.21 per hour. HMRC are carrying out increasing number of NMW compliance visits to ensure employers are adhering to minimum wage legislation, and the hospitality industry is one of the sectors which is being targeted due to the number of employees in the sector who are paid around the NMW level.

NMW legislation in its most basic form is pretty simple to implement. It becomes far more complicated where staff wages suffer deduction prior payment for the services they receive from their employer, such as the provision of accommodation or cleaning of uniforms, which are commonplace in the sector and it is vital that employers are aware of these interaction of these deductions with NMW requirements.

Employers are increasingly being caught out where they make deduction from wages for costs that they may have generally thought have nothing to do with NMW, such as the repayment of a short term loan, settling of a bar tab or deductions for breakages as in some circumstances these types of transactions can take an employees pay below NMW and cause the employer significant issues with HMRC.

Many NMW investigations are launched when a disgruntled employee reports their employer to HMRC and in 2017/2018 HMRC reported that they had identified £15.6 million of minimum wage arrears benefitting in the region of 200,000 employees through investigation.

If an employer is found to have underpaid NMW, even if it is due to a technicality the penalty regime in this area is severe and HMRC also “name and shame” employers for severe non-compliance.

A PAYE audit can help highlight areas of non-compliance and help address issues before they are picked up by HMRC and all employers are encouraged to review their procedures.

If you would like more information on this subject please contact Colin Johnson or call 01772 821021