The Great British Summer Savings scheme: what businesses need to know

In an effort to support businesses and families, the government has announced plans to temporarily cut the rate of VAT on children's meals in restaurants and family leisure activities.

It started on the 25 June, under what's being called the Great British Summer Savings scheme, the VAT rate for certain activities has dropped from 20 per cent to five per cent until 1 September. 

What does the VAT cut apply to?

The reduced rate is highly targeted. It will apply to children’s menu meals served in restaurants for consumption on the premises; children’s and family tickets for cinemas, theatres, concerts, shows and exhibitions; and admission tickets for children and adults to attractions like amusement parks and fairs, including water parks and theme parks - but not pay-per-ride attractions.

Also included in the scheme are museums and similar cultural facilities, including planetariums, heritage sites, nature reserves and botanical gardens; zoos, aquariums, wildlife parks and farm visitor attractions; soft play centres, indoor bounce parks and indoor play facilities; and observation attractions such as viewing platforms, towers and observation wheels. 

What’s not included?

However, with certain sports supplies already exempt from VAT, sports facilities aren't included. 

Why businesses are welcoming the scheme

"This is a very welcome and timely boost for the UK’s visitor attraction sector. It will help make great days out more affordable for families, while giving our members added confidence as they head into the peak summer season," says Paul Kelly, CEO of the British Association of Leisure Parks, Piers and Attractions.

"The businesses we represent are at the heart of communities across the country, supporting jobs and local economies, and this measure recognises their importance" Paul also said.

Businesses aren't legally required to pass on the savings to their customers - but are expected to do so. And if you don't, you'll need to make that clear to HMRC. However, those that do should be able to expect increased sales as a result of becoming more affordable and increasing footfall.

The scheme has been welcomed by the Federation of Small Businesses (FSB).

"Confidence in the hospitality sector is dire, and 94 per cent of small businesses in those sectors saw their costs rise over the past three months, with tax one of the biggest drivers of that," says FSB policy chair Tina McKenzie.

"A further 35 per cent of hospitality businesses expect to contract over the next twelve months. A strong summer could be the difference between staying afloat and shutting up shop for some businesses." FSB’s McKenzie says.

What businesses need to do now

You'll need to prepare for the changes, making sure that staff understand the new rules so that they can apply them properly and explain the scheme to customers.

And there's a fair amount of admin involved. You'll have to review your current pricing and update your tills, accounting software and other systems to reflect the new rate. You'll have to adjust menus and booking platforms and create a new price list.

You'll also have to make sure that your systems can distinguish between children’s tickets, adult tickets, and family tickets.

And you'll need to check over any bundled packages - for example, a family ticket that includes parking - as you'll need to split out any elements that qualify for the reduced rate from those that don't.

Where tickets are bought in advance, the date of admission will also matter, with tickets for admissions during the period getting the reduced rate, while tickets bought during the summer for events or admissions after 1 September will not.

Finally, you’ll need to be prepared to switch everything back on 2 September and make sure customers understand that the scheme was only temporary.

Potential drawbacks to consider

All this may be something of a burden for many small firms.

There have also been questions over the timing of the scheme - great for consumers, but not necessarily so helpful for businesses.

Restaurants, for example, may find that it's more trouble than it's worth, with the rate cut only applying to meals that are clearly marketed, presented and priced as children’s meals, typically via a separate children’s menu. Even the government reckons that it will only be worth around £2 per meal.

Meanwhile, for most attractions, restaurants and family venues, July and August are already the busiest weeks of the year, points out accountancy and tax advisor firm Grunberg.

"It has been argued that a scheme of this kind might deliver more genuine stimulus if it landed during the quieter shoulder periods of autumn and winter, when footfall is harder won and pricing incentives have more behavioural pull," says the firm.

What happens next?

On the whole, though, the scheme appears to represent a major boost for small businesses.

"For many small firms, these next few months matter enormously after a bruising period of rising costs and squeezed consumer spending. Families will make extra purchases, such as drinks and merchandise, which is likely to be the biggest help to small businesses’ bottom lines," says the FSB's McKenzie.

“Smaller hospitality firms have spent years absorbing rising costs wherever they can. Measures that help bring customers back through the door and give firms more room to invest are badly needed" FSB's Mckenzi also said.

There's more information on the scheme here.

If these changes have prompted you to take a fresh look at how your business is running, it could also be a good time to check that your insurance still fits the way you work today. Whether you’re adapting to new demands, welcoming more customers through the door or simply planning ahead, our team are here to help you find the right cover for your business. Book a call using the button below.