Eat Out to Help Out: What you need to know
The Coronavirus lockdown has had a devastating impact on the hospitality industry in the UK, with large numbers of businesses having to close or reduce operations for a number of months. A recent survey suggested that two thirds of the population expect not to return to dining out for months yet.
In normal times, the hospitality sector accounts for over 3 million workers and over £100bn of revenue per year, so the knock-on impact on the UK economy will certainly be significant. With that backdrop, the UK Government has introduced the “Eat Out to Help Out” scheme (the “Scheme”), with the intention of helping restaurants and other food establishments encourage custom on the quieter days of the week, in order to help build their businesses back up, by offering Government-subsidised discounts. In these FAQs we cover the key information that restaurants and other food establishments need to know about the Scheme.
What businesses are eligible?
Any establishments that sell food for immediate consumption on the premises are eligible, with certain exceptions. You must have a designated dining or drinking area, which can include outdoor seating areas (although this does not extend to tables and chairs outside takeaways or mobile food vans), and includes where that area is shared with another establishment. You must also have been registered as a food business with the relevant local authority on or before 7 July 2020.
This can include restaurants, cafes, public houses that serve food, hotel restaurants, restaurants and cafes within tourist attractions and leisure facilities, and workplace and school canteens. However, it excludes catering services for private functions, hotels providing room service only, dining services such as packaged dinner cruises, and mobile food vans. Businesses that only offer takeaway food and drink are similarly excluded.
What is the discount offered?
The discount offered is:
- a 50% discount
- for all food and non-alcoholic drinks to eat or drink in
- all day, every Monday, Tuesday and Wednesday during August 2020 (including Bank Holiday Monday)
- up to a maximum of £10 discount per diner.
There is no minimum spend requirement, and no limit to the number of times individuals can use the discount. Establishments do not need to calculate the £10 cap per diner (which includes children), but simply cap the overall discount on a bill at £10 multiplied by the number of diners (including people who are drinking but not eating, provided they are seated in a dining area).
The discount does not cover alcohol, tobacco products, food or drink sold as part of a private event, or food and drink to be consumed off premises, although if an individual purchases food with the intention of eating in, and then takes it away, the discount can still be applied. The discount does not cover other charges that you may include on the bill such as service charge.
How do we register for the Scheme?
You should register through the Government website by 31st August. Note that you must register all your establishments at the same time; you cannot add more later on. HMRC will carry out fraud and compliance checks, both when you register, and when you claim. You can register establishments from more than one group company in the same registration (in which case payments from HMRC will be made into one bank account), or you can register group companies separately.
You will need the following information:-
- Names and addresses of your participating establishments (unless you are registering more than 25 separate establishments in one registration, in which case you should provide a link to a website containing the details of each of your participating establishments)
- Your banking details
- The date that your business started trading
You may also need your VAT registration number, your employer PAYE reference number, and your unique taxpayer reference.
You will then receive a registration reference number that you will need in order to claim the discounts back (see “How do we claim the discount back” below).
You can still register for the Scheme even if you have used other schemes offered by the Government such as the Coronavirus Job Retention Scheme.
How do customers know we're taking part in the Scheme?
Once you are registered on the Scheme you will be included in the Government’s online finder tool on the Government’s website. The Government has also produced promotional material which you can download from the Government website to let customers know you are taking part in the Scheme.
How do our customers obtain the discount?
Once you are registered on the Scheme, you simply deduct the discount from your customer bills, making sure that you include the Eat Out to Help Out Scheme name on the bill when you do so. Note that you will be expected to offer the discount during your entire opening hours, for each eligible day that you are open. You must offer the discount on all sales of food and drink that are eligible, and you must offer the full 50% discount (up to the £10 cap per diner).
You must be registered before you can offer the discount.
How do we claim the discount back?
The Government’s online claim service will be available on 7 August 2020, and will close on 30 September 2020. You will be able to make your first claim after you have been registered for 7 days, and you will be able to claim on a weekly basis.
HMRC will be issuing more guidance on how to make claims once the service is open on 7 August.
What will we get paid?
HMRC aim to pay eligible claims within 5 working days of receipt of your claim.
What records do we need to keep?
You should keep records per day, and per establishment, of the total number of people who have used the Scheme, the total value of transactions under the Scheme, and the total amount of discounts that you have given under the Scheme.
How is the money we receive from the Government treated?
You will still need to pay VAT based on the full amount of money that you have received, i.e. the amount charged to your customers plus the amount claimed back from the Government. In addition, any money received through the Scheme is treated as taxable income, just as if it had been paid by your customers.
What does this mean for the franchisees operating restaurants and other eligible food businesses?
Franchisees pay royalties or management services fees to the franchisor usually based on the value of their “gross revenues”, excluding VAT and certain allowable discounts agreed with the franchisor and set out in the franchise agreement. Due to the novel nature of the Eat Out to Help Out Scheme, most franchise agreements will be silent on the question of whether the discount to be given to customers under the Scheme will be an allowable discount for the purpose of calculating “gross revenues” and whether the Government subsidy that will replace the value of the sales represented by the discount given, (assuming every claim under the scheme is accepted and paid by HMRC), should be counted into the meaning of “gross revenues” for the purpose of calculating the royalty payment.
This will depend on the drafting of the definition of “gross revenues” in the franchise agreement, and will need to be looked at on a case by case basis. Practically speaking, so long as claims under the Scheme are paid, the amount of the total royalty should not be affected by the operation of the Scheme. However, the timing of the payment of the royalty could be affected, as franchisees will probably want to calculate their income for the purpose of calculating the royalty on a cash received basis, deducting the discount from the definition of gross revenues in the period (month) in which the bill is raised, but treating the receipt of subsidy from the Government as income in the period (month) in which it is received, if different. If a claim under the Scheme is disallowed, then the franchisee will want the discount to be treated as a permanent reduction in income for the purpose of calculating “gross revenues”.
The appropriate financial treatment will be a matter for agreement with the franchisor on a case by case basis.
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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