VAT reduction: hospitality, holiday accommodation and attractions

A temporary VAT reduction will be applied to the hospitality sector, holiday accommodation and some attractions, from Wednesday 15th July 2020.

The UK Government recently announced a temporary reduction in VAT rates for businesses that make supplies of hospitality, hotel and holiday accommodation and also on admission to certain attractions. This aims to help businesses that have been particularly hard hit by the recent coronavirus lockdown.

The VAT reduction will apply from Wednesday 15th July until 12th January 2021, reducing the standard rate of VAT from 20% down to 5%.

Crunchers’ Hamish Sheppard is here with a short video to explain where the reduced VAT rate can be applied, and what you need to think about so that you can take advantage of the reduction. You can find the full details of the scheme on the Gov.UK website.

What will the VAT reduction affect?

The main supplies that will benefit from the VAT rate reduction are mostly

food and non-alcoholic beverages sold for on-premises consumption
hot takeaway food and hot takeaway non-alcoholic beverages
sleeping accommodation – in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities
Access to various attractions

What do you need to think about?

There are a number of things to consider for your business, including:

Are you ready to correctly report on different VAT rates?
Does your accounting system handle VAT at different rates – especially when introduced part way through the VAT quarter?
Are you able to split your non-alcoholic, and alcoholic sales between the two VAT rates?

If you’re not currently VAT registered then you should consider whether you would benefit from voluntarily registering for VAT. By doing so, you could potentially reclaim VAT at 20%. Your accountant will be able to advise on the best course of action for you.