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Treasury may consider temporary cut to VAT

15th June 2020

Speculation is mounting that the UK could follow Germany by reducing the standard rate of VAT in next month's emergency fiscal announcement.

On 4 June 2020, Germany slashed its standard rate of VAT from 19% to 16% from 1 July 2020 until 31 December 2020.

At the same time, Berlin revealed the reduced rate will also be cut from 7% to 5% and the temporary reduction will cost Germany €20bn.

This is the first major global attempt at fiscal easing to stimulate consumer demand in response to the financial implications of COVID-19.

It signals policy moving into a new phase as governments attempt to deal with the rapidly moving health and resulting economic crises.

A mini-Budget 2020 may take place in the first week of July in a bid to save the economy, which contracted by a record 20.4% in April.

Reports suggest Chancellor Rishi Sunak could announce a temporary cut to the UK's standard VAT rate, from 20% to 15%.

The Chancellor is also being urged to reclassify the UK's 5% reduced rate of VAT so that it applies to hard-hit restaurants, cafes, and hotels.

We can handle your VAT obligations.