July 15, 2020 • Food5 min read

VAT Reduction - In the Hospitality Industry | Just Eat for Business

Just Eat for Business’s Managing Director Ben Carter tells us how the government’s recent decision to temporarily reduce VAT for the hospitality sector is a positive step for the industry.

Today marks the first day in which hospitality businesses can enjoy a reduced rate of VAT, falling from 20% to just 5% following Chancellor Rishi Sunak’s announcement last week to provide some much-needed assistance to the beleaguered restaurant sector.

The reduction applies to the following goods until 12th January 2021:

- Food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs
- Hot takeaway food and hot takeaway non-alcoholic beverages
- Sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities
- Admissions to certain attractions that are not already eligible for the cultural VAT exemption

In light of the change, our Managing Director Ben Carter speaks about how it will positively affect the industry.

There’s no doubt that the hospitality industry has been hit incredibly hard as a result of the coronavirus pandemic and consequent UK-wide lockdown. After all, we’ve witnessed its impact firsthand, with office food delivery orders plummeting at the end of March.

But the new VAT reduction will be the helping hand the industry needs to gain some much-needed momentum.

Prior to the crisis, the hospitality industry was the UK’s 3rd largest private-sector employer, providing jobs for around 3.2 million people. However, within the first month of lockdown, 84% of employees within the sector had been furloughed.

Our recent report investigating the effects of COVID-19 on the food and drinks industry, in particular, found that almost 90% of businesses in the sector had to furlough staff, while around 66% closed at least temporarily. Of those that remained open, over 50% experienced a decrease in takeaway orders.

On 4th July, restaurants were given the green light to re-open for dine-in services - over 100 days after the Prime Minister ordered them to shut. But for many, this news alone wasn’t enough to propel them back into business as usual. A number of restaurants have closed their doors permanently, while many others are struggling to stay afloat.

So, I welcome the government’s recent decision to reduce the VAT rate for hospitality businesses. It’s a positive step in the right direction for the food and drinks industry, and indeed the wider economy.

The chancellor’s VAT cut is predicted to cost the Treasury £4bn, but according to UKHospitality, the national trade body for the sector, the hospitality industry was worth £130bn in 2018, adding £72bn to the UK economy. It’s clear that protecting and nurturing the hospitality industry is essential for the future of the economy. Restaurants and other hospitality businesses play such an important role in the community too.

Thanks to the VAT reduction, restaurants now have two options: to lower their prices, passing the savings onto their customers, or to keep menu prices the same and use the extra income to support their businesses however they see fit.

Both are valid responses and both have the power to strengthen the industry. While the former will likely encourage more customers to buy from these establishments, the latter will give restaurants a little extra cash to keep their businesses running.

At Just Eat for Business, we’re thrilled that our vendor partners will be able to benefit from these new measures. We’ve seen a steady increase in our vendor partners re-opening for office deliveries over the past few weeks and we hope that the reduction in VAT will be the nudge that the remaining restaurants need to get going again.

As a B2B specialist, we know how much the hospitality sector relies on corporate customers, particularly when it comes to food. Whether it’s staff lunches or work events, corporate hospitality is a growth area. So, we really encourage our customers to support their local restaurants and cafes, whether their menu prices have fallen or not.

As for Just Eat for Business, we will still honour our price-match guarantee. So, if our vendor partners choose to pass savings onto customers, you can be sure to find those savings via our platform too.

If they choose not to, you can rest assured that your money is helping the restaurant sector to pull through a really challenging time. After all, a healthy hospitality industry is good for us all.

Ben Carter, Managing Director at Just Eat for Business