In the July 2020 Summer Economic Statement, the UK government announced several VAT measures, including a reduction of rates for a number of sectors that experienced financial difficulty during the pandemic, including hospitality, holiday accommodation, and attractions. In the UK, the hospitality industry, including the hotels and accommodation and attractions and leisure subsectors, represent 10% of UK employment, comprise 6% of the UK’s businesses and 5% of GDP. The VAT cut is intended to boost consumer demand after the economic crisis caused by COVID-19.
In the Spring, the government announced that the VAT rate of 5% has been extended until 30th September 2021. After this date, an interim rate of 12.5% will be in place for a further six months. In April 2022, the standard rate of 20% will apply.
The VAT rate affects sectors slightly differently depending on their services. We’ve provided more information below.
If a hospitality business supplies food or non-alcoholic beverages for consumption on the premises, for example, a restaurant, cafe or pub, the business would originally be required to charge the standard rate of VAT, 20%. However, when a hospitality business makes these supplies between 15th July 2020 and 30th September 2021, they will only need to charge 5%. They will also be able to charge the reduced rate of VAT on supplies of hot takeaway food and hot takeaway non-alcoholic drinks. From 1st October 2021 the rate changes to 12.5%. More information can be found here.
Hotels and Holiday Accommodation
The same rates outlined in the Spring apply to hotels and holiday accommodation. However, these businesses will also benefit from the temporarily reduced rate if they supply sleeping accommodation in a hotel or similar establishment and make certain supplies for holiday accommodation. Additionally, the same VAT rates apply if the business charges fees for caravan pitches and associated facilities or charges fees for tent pitches or camping facilities. From 1st October, this rate will stand at 12.5%. More information can be found here.
Suppose an attractions company charges a fee for admission to certain attractions, where the supplies are currently standard rated. In that case, the attraction will only need to charge the reduced rate of VAT between 15th July 2020 and 30th September 2021. Starting on 1st October 2021, attractions will need to prepare for a new rate of 12.5%, which will apply until 31st March 2022. This reduced VAT rate applies to businesses that make supplies of admissions that are currently taxable at the standard rate. This includes shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions, and similar cultural events and facilities. More information can be found here
You can learn more about the reduced rate for hospitality, holiday accommodation and attractions on the GOV.UK website.
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Bulley Davey’s services include preparing periodic management accounts, bookkeeping, managing your payroll function, VAT services, including maintaining records and budgeting, forecasting, and financial modelling. You can learn more about our range of services for businesses here.
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