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THE extension of the reduced rate of VAT paid by hospitality firms has been welcomed by the industry though one trade organisation warned it will only be a “temporary fix” for the overburdened sector in Scotland.
Paul Waterson, spokesman for the Scottish Licensed Trade Association (SLTA), said the Chancellor’s confirmation that VAT will be maintained at the reduced rate of 5 per cent until the end of September was “excellent news”. It will then increase to 12.5% for the following six months before returning to the full 20% rate in April 2022.
In England, a provisional date of April 12 has been set for the reopening of outdoor hospitality, with indoor service scheduled to resume on May 17 before all legal limits on social contact are expected to be lifted on June 21. In Scotland, non-essential retail, hospitality, and services such as hairdressers will not open before April 26, with no indication yet as to what trading restrictions they will be under.
“It’s a game of two halves for the licensed trade and hospitality industry – good news in the short term but not such a sunny longer-term outlook, although it does buy us a bit of time,” Mr Waterson said. “The fortunes of our sector in Scotland will also depend on how our road map out of lockdown looks.”
The SLTA and the Scottish Hospitality Group (SHG) both want the 5% rate to be extended further, with the SHG arguing that the reduced level of VAT “is only a benefit to us when we are able to trade”.
Gareth Pritchard, tax partner at Deloitte, said pubs and bars “may be disappointed” that the cut has not been extended to the sale of alcoholic drinks. Meanwhile, navigating the
shift between three different rates of VAT over a 12-month period could also prove a burden.
“As the hospitality industry continues to work hard to recover from the impact of the pandemic, it’s likely that many will choose to put the money saved from a VAT rate cut back into their businesses,” he added. “However, those that choose to pass on some or all of the benefit in their pricing to consumers could further fuel demand in these sectors once lockdown measures ease.”