The temporary 5% VAT rate for certain supplies relating to the hospitality and tourism industry is due to end on 30 September.
The government introduced the reduced rate due to the pandemic. It was initially introduced for a six-month period, between 15 July 2020 and 12 January 2021, and was later extended to 31 March 2021. The Spring Budget saw the Chancellor announce a further extension, until 30 September 2021.
From 1 October 2021, the VAT rate will increase to a reduced rate of 12.5%, and the standard rate of 20% will return on 1 April 2022.
The reduced rate applies to:
- Admissions to attractions that are not already eligible for the cultural VAT exemption including:
- Sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities
- Hot takeaway food and hot takeaway non-alcoholic beverages
- Food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs
- Circuses and fairs
- Amusement parks
- Museums and exhibitions
It does not apply to sporting events, or to alcoholic drinks which continue to be standard rated at 20%.
Preparing for the VAT rate change
- Ensure you have the new 12.5% VAT rate set up on your accounting software and it is calculating correctly – can your system copy with a VAT rate change in the middle of a VAT quarter?
- Make any relevant pricing changes, for example on the company website, menus etc
- Communicate the price changes with employees, third party vendors etc.
Get in touch
If you are one of the businesses that the VAT rate change will impact, additional care will now be needed in the preparation of VAT returns, especially in the periods spanning the start and end dates.
If your business qualifies for the reduced rate and you require support with your VAT accounting, or you wish to understand more about the changes, please get in touch with our specialist team by emailing firstname.lastname@example.org or calling 01254 679131.