We have summarised the key announcements and action points below.
VAT REDUCED TO 5%
Between 15 July 2020 and 12 January 2021, certain VAT registered businesses can apply a temporary VAT rate of 5% on food, accommodation, and tourist attractions. For most restaurants and bars, this includes:-
- On-site consumption: All sales of food and drink will be subject to the reduced VAT rate of 5%, apart from alcoholic drinks, which are still subject to 20% VAT.
- Takeaway sales: All hot food and hot drink being sold will be subject to the reduced VAT rate of 5%, apart from alcoholic drinks, which are still subject to 20% VAT. Cold takeaway food and drink continues to be subject to 20% VAT or 0% VAT under the existing rules.
- The reduced rate applies to the retail end of the supply chain when an operator supplies a consumer. Wholesale supplies of food and drink will remain subject to the existing rate of VAT which is applicable (which may include 0% food items).
- Operators will need to update their EPOS to record the VAT treatment of food, non-alcoholic and alcoholic drinks appropriately.
- If your EPOS has an accounting integration such as Xero, you will need to review or update the mapping to ensure there is an equivalent 5% VAT rate, or the sync may fail.
- It is not compulsory to pass on this VAT saving to customers by way of a menu price reduction.
- Extra care needed for pre-booked events, deposits and vouchers and ensuring that the correct tax point applies.
- As this change is occurring in the middle of VAT return periods, please allow extra time to prepare the next VAT computations.
Further reading:
HMRC VAT: reduced rate for hospitality, holiday accommodation and attractions
XERO VAT: Xero UK VAT change
EAT OUT TO HELP OUT
The “Eat Out to Help Out” scheme was also announced in the “mini-Budget” to encourage consumers to spend at restaurants and cafes. The scheme is UK wide and customers will be able to see who is taking part on GOV.UK.
- The scheme covers the cost to participating restaurants, cafes and pubs which are providing a 50% discount, capped at £10 per head (inclusive of VAT), on food and non-alcoholic drinks purchased for consumption on the premises from Mondays to Wednesdays in August.
- The service charge is not included in the scheme discount – the reduction only applies to spend on food and non-alcoholic drinks.
- There are other specific exclusions of the discount, such as, it does not apply to food and drink that is sold as part of a private party, event or function.
Operators can register here from 13 July 2020.
- The government will reimburse participating establishments for the 50% discount.
- Reimbursement claims can be submitted from 7 August 2020 to 30 September 2020. HMRC will provide more guidance on how to make a claim when the registration service is open.
- Operators must keep record of:
- Total number of people who have used the scheme;
- Total value of transactions under the scheme, and
- Total amount of discounts given.
- VAT is applicable on the full amount of the customers’ bills, and any money you receive through the scheme will be treated as taxable income.
- As with CJRS claims, fraud and compliance checks will be carried out by HMRC when you register for the scheme and make a claim.
Further reading:
CORONAVIRUS JOB RETENTION SCHEME v2 AND JOB RETENTION BONUS
As previously announced, from 1 July 2020, CJRS v1 has been replaced with CJRS v2. Notable changes include: –
- Employers can only claim for employees who have previously been furloughed between 1 March 2020 and 30 June.
- There will be a new maximum limit to the number of staff who can be included on a claim. This will be based on the maximum staff ever included in a single claim before 1 July 2020.
- Previously furloughed employees can return to work on a part-time or flexi-furlough basis (a variation of contract may be required). Employers can still continue to furlough employees on a full time basis, but note the CJRS grant changes, as set out below: –
- Claims must be aligned to calendar month and cannot overlap months;
- Employees no longer have to be furloughed for a minimum of three weeks, and
- Employees can work for any amount of time and any shift pattern, while the employer can still claim for the hours not worked.
- The calculations for flexi and part-time furlough is complicated. Employers will need to calculate: –
- Usual hours of employees, (rules apply for contracted hours and zero/variable hours);
- Actual hours worked, and
- Furloughed hours worked.
- A new Jobs Retention Bonus will provide a one-off payment of £1,000 for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021.
For further information, please email your usual Relationship Partner or contact person, or request a call back.
