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VAT on eat-in or hot takeaway food from restaurants, cafés and pubs is to be temporarily cut from 20% to 5% as part of government plans to revive the hospitality industry.

Chancellor Rishi Sunak today (8 July) announced the 5% tax rate would be introduced from next Wednesday until 12 January and would also apply to accommodation in hotels, B&Bs, campsites and caravan sites; and attractions such as cinemas, theme parks and zoos.

And the government is to financially back a discount on meals at restaurants, cafés and pubs during August.

Under the banner of an Eat Out to Help Out discount, sit-down meals eaten at any participating business from Monday to Wednesday will be 50% off, up to a maximum discount of £10 per head for everyone, including children.

Businesses will need to register for the scheme from next Monday and can then claim the money back each week during August. Sunak stated funds would be in the businesses’ bank accounts within five working days.

“I know people are cautious about going out. But we wouldn’t have lifted the restrictions if we didn’t think we could do so safely,” he told the House of Commons. “And I’ve seen, in the last few weeks, how hard businesses are working to make their premises safe.

“In turn, we need to give these businesses the confidence to know that if they open up, invest in making their premises safe, and protect jobs, demand will be there – and be there quickly.”

The move has been welcomed by trade groups, with the Food and Drink Federation (FDF) pointing out that manufacturers who supplied the hospitality and catering trade had been hit hard by the crisis.

“These ‘squeezed middle’ firms will enthusiastically welcome the Chancellor’s announcement today to cut VAT on food and hospitality and slash the cost of eating out,” said FDF chief executive Ian Wright.

“We hope these measures will lead to a significant boost in demand for the hundreds of manufacturers who supply into hospitality and the out-of-home sectors and help them to manage increased supply costs.”

Wright warned, however, that plans to end the job furlough scheme could still hit these businesses hard.

“The Chancellor must therefore keep the option of extending full furlough support to hospitality and their food and drink suppliers in his back pocket, so we do not lose vital jobs and businesses.”