Restaurants and cafes slash prices as 15% VAT cut begins to aid coronavirus recovery

Some bars, restaurants and tourist attractions are today set to slash prices as a £4 billion cut to VAT comes into force.

Starbucks, Costa Coffee and McDonald's are among the companies that have already promised reductions after Chancellor Rishi Sunak ordered a temporary VAT windfall from 20 per cent to 5 per cent to help firms get back on their feet.

However, many businesses are expected to pocket the money rather than cut prices.

The Treasury has predicted that households could save £160 a year on average during the move, in place from July 15 until January 12.

The VAT cut applies to restaurants, cafes, hotels and holiday parks, and attractions such as zoos, cinemas, theme parks and museums.

VAT - Value Added Tax - is paid on multiple everyday goods and services, but the tax is usually felt by consumers.

Best Western, which runs 300 hotels, said it would be cutting prices on rooms while Mexican eat-out chain Wahaca, Waitrose and KFC also confirmed customers would benefit.

Costa Coffee said it was passing the saving "directly to customers", meaning a latte will be reduced from £2.55 to £2.23, plus an additional 25p off when using a reusable cup, and a bacon bap cut from £2.95 to £2.58.

On Tuesday, Starbucks said it would pass on the full 15 per cent discount on coffee served in company-operated stores to help boost consumer confidence.

Other shops and venues with Starbucks licences will make their own decisions, the firm said.

However, Center Parcs and Pizza Hut have said they are still working out how to respond to the cut, while the National Gallery said tickets to its exhibition would remain full price.

McDonald's also said it had urged its franchisees to cut prices on an array of products, including classics like the Big Mac and Quarter Pounder, as well as coffee.

Last week Mr Sunak also revealed an "eat out to help out" half-price voucher scheme - up to £10 per head - that will operate on Mondays, Tuesdays and Wednesdays throughout August to aid the hospitality sector.

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