Caterers of funerals, weddings, corporate conferences and other events have been left out of the Chancellor’s £4.1billion tax cut for the hospitality industry, official guidelines suggest.
The £70billion UK events industry has been on its knees as a result of the coronavirus pandemic, with caterers seeing months of event bookings vanish overnight and some seeing takings fall close to 95 per cent.
But despite the industry being put into ‘hibernation’ since the March lockdown caterers appear to have been sidelined by the Treasury, according to documents published by HMRC detailing the 15 per cent cut in VAT.
The trade body representing independent caterers called on the Treasury to clear up any confusion around the tax cut and not to once more overlook an industry employing more than 100,000 people.
Companies which supply food to funerals, weddings and corporate events could have been left out of the Treasury’s VAT cut for the hospitality industry, official guidance suggests
Hot and cold café and restaurant food, hot takeaway food, non-alcoholic drinks and takeaway tea and coffee all had the VAT slashed on them from 20 per cent to 5 per cent on 15 July until January to ease the pressure on the hospitality industry.
But the taxman’s documents stated ‘any supplies of food and drink that are supplied as part of a supply of catering services for consumption off-premises’, which include food supplied for wedding receptions or corporate conferences or cooked to deliver to a dinner party, ‘remain standard rated’.
Caterers told This is Money they felt they had been left out in the cold.
Sue Rathmell, VAT partner at accountants MHA MacIntyre Hudson, told This is Money a caterer who cooks offsite in their own home or place of business and then takes food to a wedding or other event venue would have to charge 20 per cent VAT, rather than 5 per cent.
She said: ‘Hot food provided in this way would be covered by the reduced rate, but cold food appears to be subject to 20 per cent VAT. If this is the case, then some caterers may be unfairly excluded from the VAT reduction announced by the Chancellor.’
Many caterers supply both hot buffet options and cold canapes and sandwiches.
Dan Fox, commercial director at the Nationwide Caterers Association, said while the new rules had yet to be fully clarified around catering, the signs did not appear good for a sector which he said had already been overlooked.
We call on the government for the parameters of this VAT cut to be made explicitly clear and for confirmation that catering for private events such as weddings and funerals will benefit from the reduction in VAT to 5 per cent
Dan Fox, Nationwide Caterers Association
He told This is Money: ‘It is very disappointing and frustrating that it appears that catering for private events such as weddings and funerals do not benefit from the VAT reduction.
‘This means that thousands of small, independent, family businesses who have not been able to operate for four months due to the coronavirus crisis and still have significant restrictions on what they can do, will either have to charge higher prices for catering at weddings and funerals or have lower profits.
‘The mobile and event catering industry employs over 100,000 people and contributes over £2billion to the UK economy, yet most of these businesses did not benefit from the hospitality grants and could be overlooked yet again.’
He added: ‘We call on the government for the parameters of this VAT cut to be made explicitly clear and for confirmation that catering for private events such as weddings and funerals will benefit from the reduction in VAT to 5 per cent in the same way that other hospitality businesses will do.
‘This is clearly the right and fair thing to do.’
If caterers do not pay the reduced rate, not only will their customers have to pay more at a time when hotels, pubs and restaurants can charge less, but businesses hit hard by months of usual trade disappearing over spring and summer will not be able to relieve the pressure on their margins by pocketing the tax cut.
‘We’re disproportionately more expensive’
Alix Caiger (right) told This is Money her West London-based catering company had seen turnover fall 85% due to the pandemic
Alix Caiger, 32, who runs the West London-based luxury catering company Caiger & Co, described the exclusion of the catering industry as ‘infuriating’, having previously been unable to claim previous support measures aimed at the hospitality industry like grants and business rate relief.
She told This is Money her turnover was already 85 per cent down on what it would usually be, with 15 weddings postponed until next summer and other events being cancelled as a result of the lockdown. Other caterers had seen their turnover fall as much as 90 to 95 per cent, she said.
Already struggling, she now has to compete with restaurants and other event venues which prepare their food on-site who can charge lower VAT and can benefit from the Chancellor’s August food voucher scheme. This lets those eating out between Monday and Wednesday get up to £10 off.
She claimed being excluded from the Treasury’s VAT cut had already proved a point of contention with some clients. ‘We’ve had them ask why our VAT was 20 per cent not 5 per cent, we’re disproportionately more expensive’, she said.
Her calendar for the whole year had been cleared at the start of April, she said, having already pivoted to delivering frozen meals in the second week of March, while she began offering recipe boxes in May.
Caiger & Co usually cater for weddings of up to 200 people and other big events but these disappeared as a result of the coronavirus. Instead she resorted to delivering frozen meals
‘This has given us a revenue stream’, she said, ‘but it’s not equivalent to doing 15 events a week with big weddings’.
And even though government guidance has allowed weddings to go ahead with up to 30 people present and suggested conferences and corporate events could return by October, she currently only has small private events and weddings scheduled August and September.
‘The size of the job is the difference, 150 to 200 people compared to 10 to 30’, she said.
‘We have no events scheduled for the foreseeable future’
Companies which supply working breakfasts and lunches aimed at businesses and cater for corporate events have also been devastated by the lockdown, the ban on indoor gatherings and a move towards working from home.
Family run 40-year-old Greater Manchester-based Impact Catering caters for corporate conferences in the city and usually works a lot with the University of Manchester, especially around graduation time.
Alix said other caterers had seen revenue fall as much as 95% on a normal year
But the lockdown led them to close its doors, furloughing several staff, after it decided the cost of switching to deliveries or offering takeaway service wasn’t worth it.
One of its directors, Sarah Hamer, 58, told This is Money: ‘Although we are primarily a business to business caterer, we do cater for weddings and private events so do feel quite unfairly disadvantaged in that we won’t benefit from being able to offer cheaper catering packages to the public.
‘Given that 99 per cent of our business clients are currently working from home and have no events scheduled for the foreseeable future we would have welcomed being able to offer our catering services to the public at a reduced and consequently more attractive price point.’
Her husband Gary, 59, also a director at the business, said he hoped come September there would be a return to ‘some semblance of normality’ with some business lined up.
What has VAT been cut on?
The rate of VAT has been cut from 20% to 5% on the following food stuffs:
1. Hot and cold food for consumption on the premises on which they are supplied
2. Hot and cold non-alcoholic drinks for consumption on the premises on which they are supplied
3. Hot takeaway food for consumption off the premises on which they are supplied
4. Hot takeaway non-alcoholic drinks for consumption off the premises on which they are supplied
He said the company had been doing odd jobs for regular clients and small business lunches but would normally cater for events and conferences of up to 200 people.
Sarah added: ‘I’m not exactly sure why the new rules have failed to cover event hospitality but believe it would have been a very welcome and much needed stimulus to help businesses like ours get through the next few months.’
As well as seemingly sidelining the £70billion events industry, the Treasury’s VAT reduction was previously criticised as a tax cut for chains like Wetherspoons rather than a lifeline for independent ‘wet led’ pubs which rely on selling alcoholic drinks, with the rate of VAT on alcohol kept at 20 per cent.
Tom Stainer, the chief executive of the Campaign For Real Ale, previously told This is Money it was ‘disappointing’ that VAT was not cut on beer and cider.
The rules also pose a logistical challenge for pubs and restaurants which will charge different VAT rates on different items on their menus.
This is Money contacted the Treasury for comment on the new VAT rules and the seeming exclusion of the catering industry but did not receive a response.
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