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Budget 2021: VAT cut for hospitality businesses extended

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The Chancellor of the Exchequer has extended the reduced rate of value added tax (VAT) that hospitality businesses have to pay.

The VAT rate faced by the likes of pubs and restaurants was dropped from 20% to 5% last year as part of the government’s pandemic support measures. That rate cut was only temporary however, and was initially due to conclude at the end of January before it was extended to the end of March.

This has now been extended for six months, so business will pay just 5% until the end of September.

In addition, the VAT rate will not jump back to 20% at this point. Instead there will be an interim rate of 12.5% for the six months after that. As a result the VAT rate for businesses in these sectors will not return to its full level until April 2022.

Hospitality businesses may also qualify for restart grants of up to £18,000, which is one of a suite of new schemes to support businesses confirmed by the Chancellor at the Budget.

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