VAT cut for the hospitality sector

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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The Chancellor has announced that VAT will be reduced from 20% to 5%, for 6 months ending on 12th January 2021 (as of 24th September the Chancellor announced an extension on the VAT cut to 31 March 2021), on the following:

  • Accommodation, which includes hotels, B&Bs, holiday apartments, caravan & camping pitches
  • Food and non-alcoholic drinks from cafes, bars, pubs, restaurants (including hot takeaways)
  • Attractions including theatres, shows, concerts, circuses, cinemas, amusement parks, botanical gardens, factory tours, studio tours, brewery tours, planetaria, zoos, museums, fairs and similar attractions. The cut also applies to incidental supplies such as the sale of an activity book. It does not apply to zoos, museums and theatres that already exempt their admissions.

Although there is no onus on a business to pass on the reduction in VAT to the customer, they do need to account for the correct VAT on the value of the qualifying takings. Businesses will need to ensure that their online purchasing systems, EPOS, till receipts and invoices are all updated with the correct VAT rate. For some businesses, this could mean accounting for 3 rates of VAT – 20% on alcohol, 0% on cold takeaway food and 5% on other food.

Businesses also need to think ahead about the implications of the rate reverting back to 20% on 12 January 2021 and not falling foul of the “anti-forestalling” legislation. Spending some time reviewing your VAT in the coming months will ensure you get it right and make your business is as VAT efficient as possible.

Our resident VAT guru, Ruth Corkin and her team are here to help if you need it. Please get in touch on 0330 024 3300 or ruth.corkin@hhllp.co.uk and they’ll be happy to help.

“Eat Out to Help Out” scheme

Ruth has raised a number of questions on the detail of this scheme with HMRC today – we’ll update you here once we have clarification.

Do you need extra information?
Ruth Corkin

Ruth has been involved with VAT for over 30 years. She started her VAT career as a Customs and Excise Officer in Essex and then moved into consultancy with a variety of well-known accountancy firms. She is well known in the VAT world and is the proud author of many articles and technical works.

Contact Ruth at ruth.corkin@hhllp.co.uk or on 01908 713 860