Spring Budget 2021 - Welcome relief for the hospitality sector 

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With hospitality businesses largely closed until 12 April and restrictions thereafter, the Chancellor has announced a range of support for hospitality businesses that will provide welcome relief and some certainty for the future.  

Here’s what you need to know from the Budget:  

The Coronavirus Job Retention Scheme was due to finish at the end of April. This has been extended to the end of September. However, from July businesses will have to contribute towards the cost of unworked hours. If all goes to plan, then hospitality businesses should be fully open at the end of June and have little use for the scheme during the months when there would be an increased cost to the business. 

Restart Grants

In addition to the Local Restrictions Support Grants throughout Lockdown 3, there will now be “Restart Grants” in England of up to £6,000 for non-essential retail businesses and up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses. These grants are applicable to business premises and will be calculated according to the rateable value. It’s important to note these are quoted as “up to”, so we expect there will be different levels of grant funding according to the rateable value. 

Business Rates

Retail, hospitality and leisure businesses benefitted from a business rates holiday last year. There will be further support in this area, with no business rates to pay for the period 1 April to 30 June. From 1 July these businesses will only pay 34% of their normal business rates bill. 

Reduced VAT

The reduced VAT rate of 5% for hospitality businesses applied to accommodation, food and non-alcoholic beverages was due to end on 31 March, but has now been extended to 30 September. Following this, the VAT rate will change to 12.5% for 6 months before returning to the normal rate of 20%. Although this creates and administrative burden for businesses, the opportunity to pay lower VAT rates on the summer trade will be welcomed within the sector. 

The VAT registration threshold will remain at £85,000 until 31 March 2024. This is relevant for many guesthouse owners who aim to operate below the threshold. We’re expecting pent up demand and a staycation boom this year for tourist destinations, so these guest houses will have to keep an eye on their turnover so they don’t breach this threshold. 

Corporation Tax

For businesses operating within a limited company, Corporation Tax rates will increase from 19% to 25% from 1 April 2023. However, any companies with profits below £50,000 will continue to pay the 19% rate. Companies with profits in excess of £250,000 will pay the full 25%, and any business between these two thresholds will pay a tapered rate somewhere in the middle.  

Grants

For those hospitality businesses operating as a sole trader or partnership, there will be a fourth and fifth grant. The fourth grant will cover the period February to April and will be payable at 80% of the average monthly trading profits. There will also be a fifth grant which covers the period from May to September. This grant will be subject to a turnover test. If turnover has fallen by 30% or more then the grant will be applied at 80%. If turnover has not reduced by this amount then the grant will be limited to 30%. Importantly, newly self-employed individuals can apply for this grant who couldn’t apply with the previous grants. This is particularly relevant for those who have commenced self-employment in the hospitality sector since 5 April 2019. 

To offset against the future increase in Corporation Tax rates, there is a capital allowances “super deduction” for the next two years. So qualifying expenditure on new plant and machinery within hotels, restaurant etc will be eligible for a 130% deduction against taxable profits during this time. 

Many businesses will have experienced a trading loss over the last 12 months. There is a temporary extension to allow these businesses to carry these losses back up to three years to obtain tax rebates.  

To further support the hospitality industry and its suppliers, the duty rates on beer, cider, wine and spirits will be frozen for another year.