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The cut will last for six months from July 15 until January 12 next year. The Chancellor made the announcement as he unveiled his plans to boost the economy post-coronavirus lockdown in the House of Commons today.
Rishi Sunak cuts VAT from 20% to 5% for entertainment and hospitality sectors (Image: GETTY)
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This is a £4 billion catalyst for the hospitality and tourism sectors
Unveiling the rule change, Mr Sunak said he wants to see pubs, restaurants, cafes and B&Bs "bustling again", telling MPs: "At the moment, VAT on hospitality and tourism is charged at 20 percent.
"So I've decided, for the next six months, to cut VAT on food, accommodation and attractions."
Mr Sunak said VAT will be reduced from 20 percent to five percent from July 15 until January 12 to help.
He added: "This is a £4 billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere - all helping to protect 2.4 million jobs."
VAT for pubs is being temporarily slashed to five percent (Image: GETTY)
Mr Sunak said the Government would also subsidise half-price restaurant meals served on Mondays, Tuesdays and Wednesdays in August.
Pubs in England reopened on Saturday after an enforced three-month lay-off - but the industry has been badly hit by the pandemic, not least as a result of widespread concern about the ongoing risk of catching the disease in public areas.
British high-street retailers, as well as pubs and restaurants, have so far seen only around half their customers return as lockdown measures have been partially relaxed in recent days and weeks.
The Government's furlough scheme winds down in October, and Mr Sunak stressed he was acting in an attempt to avoid widespread redundancies as state support is withdrawn.
He added: "While we can't protect every job, one of the most important things we can do to prevent unemployment is to get as many people as possible from furlough back to their jobs."
Jon Stevens, tax partner at global legal business DWF, said of the VAT cut: "The hospitality sector has long campaigned for a reduced rate of VAT and it is a shame that it has taken the economic damage of COVID-19 to produce a temporary tax cut.
"However, businesses in the restaurant and hospitality sectors will welcome the reduction in VAT to five percent that will hopefully encourage people to spend money with them while we recover from lockdown."
More to follow.
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