Despite the most recent announcement restricting gatherings to six people or less, a sense of normality is slowly returning to the hospitality sector. However, there still remains a significant number of hurdles to overcome.
Below we have set out some topical areas of taxation that businesses need to consider.
For those employers that continue to employ staff that were previously furloughed, the government will provide for a JRB of £1,000 per employee after 31 January 2021.
Employees must have been continuously employed by the relevant employer from the time of the employer’s most recent claim for that employee until at least 31 January 2021, and must have been paid an average of at least £520 a month between 1 November 2020 and 31 January 2021 (a total of at least £1,560 across the three months).
The employer must have up-to-date Real Time Information (RTI) records for the period to the end of January to validate payments. Finally, employees must not be serving a contractual or statutory notice period that started before 1 February 2021, for the employer making a claim.
The hospitality industry has been benefitting from a reduced 5% rate of VAT since 15 July 2020. This was introduced as part of the Chancellor’s summer statement and will have effect until 12 January 2021.
The reduced rate is applicable to several different areas. Firstly, the supply of sleeping accommodation in hotels can be subject to the reduced rate. This rate applies to all stays which take place in the period. It also applies to payments received during the period which are for stays from 13 January 2021 onwards.
This allows for those booking next summer holidays to also enjoy the reduced rate of VAT, which may be helpful to hotelier’s promotional plans. However, the 5% rate will not apply if just a booking is made with payment deferred to the date of stay. In that case the stay would revert to the 20% rate.
The second area to benefit is that of catering. The 5% rate has been applied to:
The key point to note on the above is that alcohol (a drink containing more than 1.2% ABV) is excluded from the reduced rate of VAT, it remains at 20%. Additionally, when getting a takeaway only hot drinks benefit from the lower rate of VAT. This means that cold drinks, such as a can of Coke or a milkshake, stay subject to the standard rate.
Those in the trade will need to make sure that they have sufficient controls in place to manage this change and make sure that the correct amount of VAT is being accounted for. This will be particularly important where orders are taken which include items subject to both rates (i.e. a take away coffee and cold sandwich).
As a final point to note, the ‘Eat out to Help out’ scheme may be over but many businesses will not have yet submitted VAT returns which cover that time period. Care needs to be taken on calculating the VAT due for sales made under this scheme. Whilst the 5% rate will apply to relevant items, it is necessary to calculate the VAT by reference to the total undiscounted bill amount. Again, this will make it very important to keep good records and have sufficient controls to ensure VAT is not inadvertently under declared.