Retailers Hope for Reductions in VAT and Distancing Rules

The Chancellor is reportedly considering either a blanket or a targeted reduction in consumption taxes as retail bodies are demanding an emergency stimulus for the high street. According to The Times, a temporary cut in VAT is being considered by the Treasury, but no decision will be made until data such as credit card receipts reveal whether shoppers are spending again in sufficient numbers.

The move would see the UK follow the lead of Germany, which reduced VAT from 19% to 16% in an effort to stimulate demand following the outbreak of COVID-19. However, there is speculation that the UK could be set to go even further by cutting its standard VAT rate down as low as 15%, with a 5% reduced rate reclassification for hard-hit restaurants, cafes and hotels.

The British Retail Consortium is calling on the government to consider a range of options to stimulate demand. Helen Dickinson, Chief Executive of the BRC, said: “The Government should consider options to stimulate demand, such as a short-term reduction in VAT or a temporary income tax cut for lower-income workers”.

In a further boost to the high street, Sunak also announced that the 2-metre social distancing rule has been placed under “active review”. Pressure has been building on the government to reconsider the rule, given the impact it is likely to have on the ability of retail and hospitality businesses to remain profitable as they reopen.

The Prime Minister confirmed yesterday that the rule was being reviewed by a panel of economists and scientists. Pointing to figures from the Office for National Statistics showing that only one person in 1,700 people was infected, Boris Johnson expressed optimism that the rule could be relaxed soon.

The Prime Minister said: “As we get the numbers down, so it becomes one in a thousand, one in 1,600, maybe fewer, your chances of being two metres, one metre or even a foot away from somebody who has the virus are obviously going down statistically. So you start to build some more margin for manoeuvre, and we’ll be looking at that and keeping it under constant review.”

If you’re planning on reopening your retail business this week, take a look at our range of guides on how to bounce back safely and successfully:

- Five Vital Steps to Prepare Your Retail Business for Reopening
- How to Keep Customers and Staff Safe When You Reopen
- How to Drive Foot Traffic to Your Store When You Reopen

We have also prepared free social distancing signage which you can download here.