Fri 23rd Sep 2022 - Anger as chancellor’s mini-Budget ignores pleas for VAT reduction and business rates relief Anger as chancellor’s mini-Budget ignores pleas for VAT reduction and business rates relief: Industry leaders have lambasted chancellor Kwasi Kwarteng’s mini-Budget after it offered little in the way of support for struggling hospitality businesses. Sector businesses were hoping that the new chancellor would follow the National Insurance reversal, announced by prime minister Liz Truss earlier this week, with a package of VAT reduction and business rates relief. Instead, Kwarteng merely confirmed his energy bill relief scheme for businesses, which he said is likely to cost £60bn for six months from October. The chancellor also confirmed the government will scrap a planned increase in the amount of tax companies pay on their profits, with corporation tax having been due to rise from 19% to 25% under plans drawn up by previous prime minister, Boris Johnson. He went on to say the basic rate of income tax would be cut to 19p from April 2023, a year early, and the top rate of income tax, currently 45% and paid by those earning over £150,000, scrapped. Furthermore, Kwarteng announced an 18-month transitional measure for wine duty, and an extension of draught relief to cover smaller kegs of 20 litres and above. He also scrapped planned increases in the duty rates for beer, cider, wine and spirits, and said VAT-free shopping for overseas visitors would be introduced in an effort to “modernise” the UK. Kate Nicholls, chief executive of UKHospitality, said: “The stated objectives of boosting growth and tackling inflation rightly put business at the heart of the govt’s agenda, but today’s measures will take time to take effect. The chancellor committed to making the UK a globally competitive tax regime, yet overlooked two obvious levers to achieve that, through lower VAT and business rates reliefs. Our VAT rate is the highest in Europe, which is starkly at odds with ambitions for global tax competitiveness and will hopefully be addressed in the autumn Budget, if not before. While tax free shopping for overseas customers is a welcome step to attract overseas tourists, a far more immediately impactful step would be to reduce VAT for our domestic customers. Confirmation of the energy and NIC proposals will allow our businesses to better plan for survival. Indeed, today’s announcement includes a number of positive measures which will bear fruit in due course, but more is urgently needed to help struggling businesses survive through the winter. There’s a clear shortfall between the positive tax plans and the lack of needed immediate business support.” Michael Kill, chief executive of the Night Time Industries Association, said: “We are extremely disappointed with the chancellor’s announcement. We have been extremely clear with the government that the energy bill relief scheme, even with the announcement of the limited tax cuts on National Insurance, corporation tax and duty, is unlikely to be enough to ensure businesses have the financial headroom to survive the winter, especially with yesterday’s announcement of the rise in interest rates from the Bank of England. I would urge the chancellor and government to reconsider these measures and re-evaluate the inclusion of general business rates relief and the reduction of VAT within these measures.” Peter Borg-Neal, founder and chairman of Oakman Inns, tweeted: “Deeply disappointing. Clearly, we have failed to get what was needed for SMEs in our sector. Beer duty will benefit brewers and supermarkets only. Nothing on business rates or VAT. Savings on NI eaten up by interest rate rises. A cut in corporation tax is useless to SMEs that built up losses during covid. Our industry is beset with unfair pre-profit taxes. How do we prosper in this scenario? We need profits to generate debt capacity – then we can fund capex.” Sacha Lord, the night time economy adviser for Manchester, tweeted: “Speechless. No VAT or biz rate support for hospitality. Corporation tax cuts are completely useless if businesses aren’t turning a profit, or worse, closed. These announcements will now mean last orders for thousands of hospitality businesses, meaning mass redundancies. I’m absolutely clear, this gov’t is just about big business, corporations and the fat cats. They have just sent a strong message to the hospitality industry: They don’t care. They have just thrown small family run businesses to the wolves.” Steve Alton, chief executive of the British Institute of Innkeeping, said: “Today’s announcement by the chancellor does not address the vulnerability of our members’ pubs in every community. The energy price guarantee, while welcome, will see most pubs at least doubling their energy costs from last year in addition to the inflationary pressures on their costs of doing business. We are hopeful that a number of his measures will support consumer confidence and maintain demand at this now critical period of trading. His recognition of too many barriers to enterprise must now also translate into radically reduced regulation, allowing our members to trade fully and freely alongside delivering a significant reduction in the ongoing disproportionately high business rates that our members pay. Simply, without further support, many pubs will fail.” Andrew Crook, president of the National Federation of Fish Friers, said: “Sadly, the government have not done enough to support small independent businesses. They have put bankers above bakers and financiers over fish friers. A lot to digest, but with lower taxation on profits, there is an implication that we are going to show a profit. That is extremely unlikely for the vast majority of my members.”