Leisure & hospitality 2016 Budget review and analysis

Mar 17, 2016
Scott is the partner responsible for looking after the firm’s healthcare and medical sector clients. Scott also specialises in advising small businesses.
Hospitality 2016 Budget review

Welcome to our leisure and hospitality 2016 Budget review

Following a year in which the Chancellor had a pre-election Budget in March, a surprise summer Budget in July and an Autumn Statement in November, on 16 March the Chancellor delivered his first Budget of 2016.

In this leisure and hospitality 2016 Budget review we summarise the key points and developments arising from the 2016 Budget and focus specifically on what the changes may mean for the leisure and hospitality sector.

Budget summary (leisure and hospitality specific):

  • Increases in business rate relief for small businesses
  • A new sugar levy from 2018
  • Freezes in beer and cider duty
  • Rises in wine and spirit duty
  • Corporation Tax will be cut to 17% by 2020
  • New stamp duty rates for commercial property from 17 March 2016
  • Fuel duty to be frozen again
  • Personal Allowance to increase to £11,500 in April 2017
  • Higher-rate threshold will increase to £45,000 in April 2017

Leisure and hospitality 2016 Budget impact

Welcome news, but where’s the real change?

Scott Sanderson, Partner at Hawsons, commented: “Although the 2016 Budget brought some welcome news for the leisure and hospitality sector, particularly through the expansion of the business rate relief, reduction in corporation tax rates and freezing of fuel duty, there was no major change for the sector. Payroll costs and supplier costs are rising at a faster rate than ever before and with the apprenticeship levy, the new National Living Wage will only add to the pressures that auto enrolment and year-on-year National Minimum Wage increases have brought.”

“It was good news to see overall support for small business and entrepreneurs – in a Budget that the Chancellor coined ‘a Budget that backs small businesses’ – particularly as this can have a knock-on effect for the leisure and hospitality sector. The corporate hospitality market in the UK has continued on an upward trend as business confidence has slowly returned and is it vital that the government does all it can to keep confidence high and uncertainty low.”

Business rate relief for small businesses

The Chancellor announced a progressive approach to business rates, with the business rate relief for small businesses more than doubling from £6,000 to £15,000. This increase to the annual limit will exempt nearly thousands of small businesses, with 250,000 businesses paying less in business rates.

Scott added: “With the new National Living Wage just around the corner, this cut in business rates will give a major boost to businesses in all sectors. The expansion of the business rate relief with alleviate some of the pressures on leisure and hospitality businesses and will help cover some of the additional costs and is of course a welcome change.”

Freezing of fuel duty

The fuel duty freeze will be extended for another year, taking it to 6 years at the current rate at the end of 2016/17.

The freezing of fuel duty for yet another year is welcome news for the leisure and hospitality sector. Restaurants, pubs, hotels and wedding venues all rely on the delivery of goods in some capacity, so a frozen fuel duty will see a check on costs.

The Chancellor claimed that this was “the tax boost that keeps Britain on the move.”

Freezes in beer and cider duty – but rises in wine and spirit duty

One again the Chancellor backed pubs across the sector with a freeze in beer and cider duty. Last year the Chancellor introduced a cut in beer and cider duty for the third time in a row.

The planned rises in wine and spirit duty, however, were unwelcome surprises.

A sugar levy

In an effort to reduce obesity in the UK the Chancellor also announced a levy on the soft drinks industry, which will be introduced in two years’ time (2018). We wait and see what the impact of this change will mean for the sector, but it could see increases in supplier prices and a likely fall in demand for such products.

The sugar tax also exempts milk-based drinks which is good news for the sector and good news for coffee shops.

The exact details behind the sugar levy were not disclosed.

Commercial stamp duty 

Following last year’s reform of residential stamp duty, the Chancellor announced that commercial stamp duty will be reduced for small businesses with a zero threshold for commercial properties with a value of up to £150,000 and 2% on the next £150,000.

This new tax regime on commercial stamp duty comes into force on 17 March 2016.

Scott added: “The cut on commercial stamp duty is a big boost for the leisure and hospitality sector. As with the example the Chancellor used in his speech, a pub worth £270,000 will see a typical purchaser save £5,000, with a reduction from £8,000 to £3,000. This is a very welcome announcement for the sector.”

Property adviser Christie & Co welcome the changed to cut commercial stamp duty with Neil Morgan, Managing Director, Pub & Restaurants commenting: “The cut on commercial property stamp duty is a tremendous boost to the sector.”

Corporation tax

Corporation tax rates were once again cut by the Chancellor in the 2016 Budget, which will of course bring tax opportunities for small businesses and their owners. The tax rate currently stands at 20% and was proposed to fall to 18% by 2020 (announced in the 2015 Budget), but will now fall to 17%.

The below table shows have corporation tax rates have been on a downward trend in recent years.

Corporation tax rates 2016 Budget

A reduction in corporation tax rates will likely have a knock-on effect on business confidence.

For more information

More from our leisure and hospitality experts

You can find all of our latest hospitality sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson

Scott Sanderson, Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on ss@hawsons.co.uk or 0114 266 7141.[/author_info]