With businesses already reopening in the post-lockdown, there’s a lot of tension to go around. One fear is that the reopening will see a corresponding spike in COVID-19 cases. This is less likely than in other countries with dismal adherence to safety precautions.
Another fear is that the recovery will be too slow. To bolster the gains of the early reopening efforts, the Chancellor of the Exchequer has a rolled out several schemes. The first is a discount on in-restaurants and pub meals and drinks.
The second focuses on a discount to the value-added tax (VAT) applied to both hot takeaway and restaurant foods. Like most government programs, getting registered and taking advantage of these programs isn’t automatic.
The following will go through the scope of the programs and how to take advantage of each.
One thing is for sure, you need an experienced Restaurant accountant to guide you in these challenging times. Restaurant accounting is more then numbers.
Tax Cuts for Pub Meals?
Introduced by Rishi Sunak, the purpose of the Eat Out to Help Out scheme is to get the public into restaurants and pubs to improve the economy. Roughly £500 million has been allocated to the program.
While this sounds good, it’s faced some criticism at being a paltry sum in the face of the economic restructuring needed as business open after the pandemic lockdown.
How much this discount will help the average citizen is debatable.
The impact on the £130 billion hospitality industry from the reduction in VAT that was also announced is more concrete.
With many restaurants and pubs operating on razor-thin profit margins, even in the best of times, every little bit helps. It’s been a tough road for these businesses over the past several months and a boost early in the reopening process could produce dividends.
Restaurants that have been staying afloat through assistance programs and takeaway sales need to be mindful of how they react to the influx of business. Staying on top of the financial situation is key to not tripping out of the gate.
Two Schemes, Two Different Opportunities
Together these two schemes provide a rich opportunity for the economy as a whole.
The Eat Out to Help Out scheme offers a discount of 50 per cent on restaurant and bar food and drinks. This discount caps out at £10 per person per visit. This discount applies throughout August for purchases made in the early part of the week, the slow period fo eateries.
The VAT discount applies to the hospitality industry as a whole, lowering the 20 per cent rate to 5 per cent through January of 2021.
Benefits of Eat Out to Help Out Scheme
Understandably consumers are reluctant to spend their time and money eating inside restaurants. The ongoing fear of infection is one deterrent, the common cuts in income resulting in tighter budgets is another.
This scheme looks to combat both fears by offering an incentive to eat on the slower days where eateries are typically sparsely attended. This offers some relief from the congestion of the weekend.
Since the discount is offered on a per head, this means that even large families can benefit. Finally, the discount is per visit, enticing people to get out more than once a week and even more than once a day.
The restaurants get reimbursed for the discount so they keep the same income with a hopefully increased volume of patronage.
Benefits of VAT Reduction Scheme
While the former scheme is intended to bring in more cash early in the reopening, the VAT reduction provides a significant long-term reduction in overhead to restaurants.
With lower overhead, restaurants will be able to recoup some of the losses incurred through the lockdown. This will also help them pay back-to-work employees immediately with less strain on their credit and other debts.
Registering for Eat Out to Help Out
If you have a restaurant accountant then this will be easy as they will be able to take care of all the paper work and deadlines.
Establishments able to register must sell food on-site and have space to seat people in their area or a shared area. This means a food court would count but a food truck would not. Businesses needed to have registered as a food business before 7 July.
Takeaway food providers, caterers, and hotels also cannot register if that is their primary offering. A hotel bar counts, a hotel kitchen offering room service does not.
It’s been made clear that agents can’t apply for the scheme in place of the direct representatives of a restaurant or eatery. That doesn’t mean it has to be done alone. Getting a tax agent or accounting firm to compile the paperwork and have it ready to submit on the 13 July 2020 date is possible.
Having everything ready to go means getting approval quickly and being ready to benefit from the scheme well before the roll-out date. Registration closes 31 August and reimbursements are set to disperse from 7 August through 30 September with a five-day turnaround.
To register an establishment will need to provide a variety of materials.
The first grouping includes information to prove the business is real and properly registered through VAT, PAYE, or another Corporation Tax or Self Assessment.
The second group includes banking and financial information to receive the reimbursement via deposit.
For chains with more than 25 locations, only the headquarters needs to be listed. For those with less than 25, the individual address of each location needs to be included.
Registering for VAT Reduction
If a business is registered with their appropriate authority, they need to do nothing to apply for or receive the VAT reduction. This will be handled automatically.
A business will need to be mindful of the change in processing their paperwork to ensure they provide a proper and accurate VAT return to the HMRC.
The VAT reduction applies only to specific charges within a business, not all offerings.
Keep it Simple
In the coming weeks, businesses will need to keep a close eye on their finances and profit and loss statements. it’s not as if pub meals at a discount will solve all the current problems, but a healthy hospitality industry is a good indicator of a healthy economy.
Keep up on your financial situation by contacting KG Accountants for guidance and services.
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