It’s important for food & beverage business owners to stay up-to-date with upcoming tax changes, particularly in the wake of the pandemic. Some tax breaks and incentives are due to end shortly, so F&B business owners need to prepare to absorb the impact of this, or take fast action to capitalise on these incentives while they’re still available. Although not all of the upcoming changes are necessarily good news for F&B businesses, there are also some lucrative new opportunities out there, too. Let’s take a look.
1. VAT Cuts Are Ending
As a result of the pandemic, the government introduced reduced VAT rates for hospitality businesses in July 2020, cutting the rate from 20% down to 5%. For cafes and restaurants, this applied to food and non-alcoholic beverages sold both for on premises consumption and for takeaway. However, as of October 1 2021, the VAT rate will increase to 12.5%. On 1 April 2022, it is expected to return to the standard rate of 20%.
2. Capital Allowances
Don’t fret – it’s not all bad news.
Businesses will benefit from more generous first year allowances on plant and machinery purchased between 1 April 2021 – 31 March 2023, so long as the items are new, unused and comply with environmental requirements. Main rate assets will receive a 130% first year allowance whilst assets that qualify for special rate relief will receive a 50% allowance.
Meanwhile, the Annual Investment Allowance has been extended and will remain at £1,000,000 until 31 December 2021.
F&B businesses may also benefit from an enhanced Structures and Buildings Allowance (SBA) within Freeport tax sites across the UK. An SBA of 10% will be available for structures that are brought into use before 30 September 2026, and this will apply to both corporation and income tax. There will also be a 100% enhanced capital allowance for companies who invest in plant and machinery at Freeport sites before the aforementioned date.
3. Employment Taxes
Employees, employers and self-employed people under the State Pension age will be subject to higher rates of National Insurance. Class 1 and 4 Contributions will rise by 1.25% in order to fund the new Health & Social Care Levy as of the 6 April 2022.
4. The End of Furlough
The Coronavirus Job Retention Scheme (CJRS) will end on 30 September 2021. Under the scheme, furloughed employees have been able to receive 80% of their usual wages up to £2,500 per month. Since July 2021 employers have been required to contribute towards the cost of unworked hours by 10%, rising to 20% for August and September.
In July 2021, HMRC reported that a quarter of all furloughed workers were employed within the hospitality industry. When the CJRS ends, employers must decide whether to reinstate furloughed workers under their existing contracts, negotiate changes to employment contracts or make employees redundant.
5. Plan for Jobs
Initially announced in 2020, the Chancellor’s ‘Plan for Jobs’ created new schemes to support young people in finding employment and gaining valuable skills and experience. This also represents a cost-effective way for F&B business owners to hire and train new staff. Given the current staff shortages in cafes and restaurants across the UK, this is definitely something to take advantage of.
There are three main types of scheme:
- Kickstart – this scheme will provide six month work placements for unemployed people between the ages of 16-24 who are currently on Universal Credit and perceived to be at risk of long-term unemployment. The government will fund 25 hours per week at the national minimum wage, plus NIC and minimum employer pension contributions.
- Traineeships – employers in England who offer work experience to young people with Level 3 qualifications and below will receive £1,000 per trainee. There is a maximum limit of 10 trainees per business.
- Apprenticeships – if you hired a new apprentice between 1 April – 30 September 2021 you may be eligible for a payment of £3,000. The apprenticeship start date must be before 30 November 2021.
6. Recovery Loan Scheme
The Recovery Loan Scheme will run until 31 December 2021. This scheme was launched to help industries that were particularly badly affected by the pandemic, including cafes and restaurants. Business owners can apply for term loans and overdrafts from £25,001 to £10 million, and invoice or asset finance from £1,000 to £10 million. The government will guarantee 80% of the finance and interest rates are capped at 14.99%, although the HM Treasury estimates that they will be significantly lower for most business owners.
7. Increased Business Rates from April 2022
In April 2021 cafes and restaurants, among other hospitality businesses, were granted a 100% discount on their business rates until 30 June. For the remainder of the financial year, the discount was set at 66% up to a total value of £2 million for businesses which were forced to close as of 5 January 2021. If your business did not have to close during the third national lockdown, the cap is set at £105,000 and you can opt out of the relief if you do not feel your enterprise was adversely affected.
F&B business owners should bear in mind that on 1 April 2022, the discount will end and business rates will return to normal. This should factor into your financial planning for the next fiscal year.
Summary: Swings and Roundabouts
Although the end of VAT cuts and the furlough scheme is unwelcome news for many F&B business owners, there are also new opportunities to capitalise upon. Hiring incentives can provide a solution to staffing shortages whilst the Plan for Jobs, increased capital allowances and the Recovery Loan Scheme represent opportunities for recovery an ty d growth. It’s important that F&B business owners stay informed on the latest tax changes and incentives in order to maximise their chances of success in a post-pandemic Britain.
Disclaimer: the information in this blog post is for guidance only and is not intended as advice. Please seek professional advice before taking action.