The Association of Convenience Stores (ACS) has welcomed the inclusion of certain food and drink sales in the reduced rate of VAT announced by the Chancellor in his Summer Statement.
During his statement, Chancellor Rishi Sunak announced that the rate of VAT would be cut from 20% to 5% on eat-in or hot takeaway food, mentioning cafes, pubs and other hospitality businesses as those that would benefit however there was some confusion on whether this would apply to convenience stores. The Treasury confirmed that if any vendor provides food and drink for consumption on the premises, or hot takeaway food or drinks, then those supplies are eligible for the reduced rate. Cold takeaway food and drinks are not included in the reduced rate. The reduced VAT rate will apply from 15 July 2020 to 12 January 2021.
Figures from the 2019 Local Shop Report show that almost one in four convenience stores have some form of hot food counter or cabinet (23%) with around one in six (15%) currently providing either indoor or outdoor seating for customers.
Confirmation that convenience stores can go through the same process as other businesses to get licences for seating outside their store was also welcomed.
ACS chief executive James Lowman said: “We are pleased that the Treasury and the Ministry of Housing, Communities and Local Government (MHCLG) has confirmed to us that convenience stores and other small shops will be able to benefit from the reduced rate of VAT on specific food and drink sales, and that our sector will be able to apply for pavement licences. Food service is a significant growth area in the convenience sector which will receive even more of a boost during the reduced VAT period, and with customers able to eat food at tables put outside the store.”
MHCLG is expected to publish guidance on applying for pavement licences shortly. Convenience stores will be able to apply, with a maximum seven day application process and a maximum £100 fee, for a pavement licence along with other food businesses.
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