Budget 2021: What are hospitality businesses calling for?

02/03/2021

With most of the hospitality sector looking set to be closed for around three more months until at least 17 May – well after economic support is currently due to end – hospitality firms are urging the Chancellor Rishi Sunak to provide further financial support in the Budget.

Peter Davies, Hospitality Partner at WMT – Chartered Accountants provides a summary of the measures the sector would like to see in the Budget and the issues it is currently facing:

Extend the VAT reduction

In 2020, VAT was cut temporarily from 20 per cent to five per cent on a large proportion of goods and services in the hospitality, leisure and tourism sectors.

However, on 31 March, it is due to return to 20 per cent, which worries the sector as prices could soar on meals, outings and tickets.

With the hospitality sector currently closed by the UK’s third national lockdown, businesses are unable to benefit from the lower rate of VAT.

With support from 166 companies, UKHospitality organised a joint letter urging the Chancellor to extend the VAT reduction and business rates holiday in the 2021 Budget on 3 March.

“Given the right ­fiscal support in March and safe and sustainable trading conditions in place, we can help this country ‘bounce back’ from the pandemic in a safe and responsible way,” the letter says.

Extending the VAT cut for a year “will be critical to boosting employment, particularly in 16-24-year-olds”.

“There is no point in the Government undoing all the good work it has done in 2020 by pulling the rug from under us as we get back on our feet,” said Kate Nicholls, CEO of UKHospitality.

Extend furlough

Additionally, the Food and Drink Federation (FDF) is calling for more support from the Treasury regarding furloughing staff in the upcoming Budget.

Many hospitality businesses are either struggling to continue contributing to furlough payments or worry about the end of its extension in April. Since August last year, furlough has not been free and employers have had to contribute various amounts, ranging from the current National Insurance and pension contributions through to the 20 per cent of an employee’s usual wages they had to contribute last October.

The FDF is one of many stakeholders in the sector asking for an extension to the furlough scheme, at least until their venues are allowed to open inside.

It says: “it is only correct that the Chancellor outlines significant extensions to the furlough, and credit insurance schemes as part of his Budget announcement next week.

“The food and drink industry is the UK’s largest manufacturing sector. It will therefore be key to the country’s economic recovery, with a footprint in every region.

“Now is the time for [the] Government to provide additional support, to ensure those businesses most at risk can play their part in putting the country back on its feet.”

The Society of Independent Brewers (SIBA) back this call as they believe many small breweries and pubs do not have a fair advantage under the Prime Minister’s roadmap, published on 23 February.

Including Tronc in furlough

Despite being taxable income, the Chancellor has declined to take tronc payments into account in calculating furlough payments.

With tronc representing a substantial proportion of the income of many people working in the hospitality sector, the omission of tronc payments from furlough pay calculations means that many are not receiving 80 per cent of their usual incomes but more like 50 per cent.

Rent support

HospoDemo is currently running a social media campaign asking the Chancellor to #SaveHospitalityRishi. Founder Rachel Harty, who is also calling for an extension to the VAT reduction, the furlough scheme and business rates holiday, is calling for an extension to the rent moratorium until the end of next financial year to help businesses get back on their feet.

Harty is also asking the Government to repeat the Eat Out to Help Out scheme, once safe to do so.

Extending business rates relief

Business rates relief for businesses in the hospitality sector is due to end with the end of the current financial year on 5 April 2021 – well before hospitality businesses will be able to reopen for indoor service.

This means that, as things stand, hospitality businesses will have to start paying business rates again before they are able to generate any income.

The Scottish Government has already confirmed that business rates relief will continue into the new financial year and the same is needed south of the border.

Job Retention Bonus

Scrapped by the Chancellor just hours before it was set to take effect, the Job Retention Bonus (JRB) would have paid out £1,000 to employers for every previously furloughed employee they brought back to work and retained until at least the end of January 2021.

Many hospitality sector businesses had budgeted in the expectation of receiving the JRB and had no reason to expect the Government to retract the policy before it even began.

It is rumoured that the Chancellor will announce a similar policy in Budget, but businesses may now question whether it will actually come to pass after being stung last time this policy was announced.

For more information or advice on related matters, please contact our hospitality experts at WMT today.