• Date

    29 Oct 2021
  • Category

    Tax

Autumn Budget: Hospitality the big winner but sector remains fragile

Hospitality is the big winner of the Autumn Budget 2021, but the sector remains fragile, warns Head of Tax and SME advisory specialist, Praveen Gupta.

As one of the hardest hit sectors by Brexit and the Covid-19 pandemic, hospitality businesses have struggled with unsustainable debts, losses and staffing problems, resulting in many permanent closures, with more predicted.

Chancellor Rishi Sunak, in his first post-Brexit Budget, announced a new one-year 50% business rates discount for the retail, hospitality, and leisure sectors.

Mr Sunak also announced a significant reform of alcohol duty, with the number of main duty rates cut from 15 to six and products taxed in proportion to their alcohol content. This will lower the price of draught beer and sparkling wine, whilst he also cancelled a planned increase in duty on spirits, whisky, wine, cider, and beer from midnight tonight.

Praveen welcomed the announcements but warns more needs to be done to ensure SMEs in the sector continue to recover.

Praveen warns: “The changes announced in today’s budget are good news for hospitality and will go some way to securing the short-term future for SMEs in the sector. However, the sector remains fragile and more needs to be done to help businesses in the long term.

By halving business rates and reforming an outdated alcohol duty, the Government has shown innovation and creativity in support of hospitality businesses. At the same time, the confirmed increase in the national living wage and minimum wage means a pay rise for millions of low-paid workers, with wages already accounting for over half of all operating costs in the hospitality sector.

Following the Autumn Budget 2021, the Government has kept plans to reintroduce to the full VAT rate of 20% from April 2022 for hospitality businesses following a temporary cut, which increased from 5% to 12.5% this month.

The increase in the temporary VAT cut from 5% to 12.5% came too soon for many hospitality businesses. Whilst new VAT measures announced in the Autumn Budget will ease some of the burden, hospitality SMEs should brace for the reintroduction of the full 20% rate.”

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Praveen Gupta Photo

Praveen Gupta

National Head of Tax Birmingham
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