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A boost for staycations as VAT rate is cut to 5%

VAT on food, accommodation and attractions is to be slashed by three- quarters in a boost for hospitality firms hit hard by the pandemic.

The rate will be cut from 20 per cent to five for the next six months, chancellor Rishi Sunak announced in his ‘coronavirus budget’.

The reduction, which runs from next Wednesday until January 12, will apply to eat-in and hot takeaway food from restaurants, cafes and pubs, which have started to reopen over the past week.

It will also cover hotels, B&Bs, holiday camps and caravan sites — plus attractions including cinemas, theme parks and zoos.

‘This is a £4billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere — all helping to protect 2.4million jobs,’ he told MPs.

However, the VAT cut does not include alcoholic drinks. Russell Nathan, senior partner at accountancy firm HW Fisher, said: ‘Our restaurants, pubs, shops and hotels are struggling.

‘This is a timely announcement from government as businesses are in desperate need of a clear action plan.’

David Weston, head of the Bed & Breakfast Association, was ‘delighted’ by the VAT cut.

‘It will help stimulate demand and, once our borders open to incoming tourism, will also help UK tourism overall as Britain’s VAT rate has been amongst the highest of our international competitors,’ he said.

Joss Croft, chief executive of tourism trade association UKinbound, said the measures will ‘deliver immediate positive impacts’ but many firms relying on foreign tourists are ‘on the brink’ and would not benefit.

‘Longer-term support will be required for these businesses,’ he added.