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Hospitality – diversify to survive

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Since the initial lockdown in March 2020, I have seen many sensible ways that the hospitality trade has had to diversify to keep business alive.

Coffee shop owners had to send home their staff, block off the entrance doors and continue to serve the British public with their daily caffeine hit through a makeshift serving hatch. Restaurant owners and chefs signed up to food delivery services such as Deliveroo and Uber Eats, while others closed the doors and created a dine at home service, with three-course meals delivered in the post ready for customers to simply reheat and serve at home.

Changing business models almost overnight is no mean feat, but that coupled with quickly introduced legislative changes relating to VAT has left the hospitality trade with a lot on its plate.

To boost customer demand, a reduced rate of 5% VAT was introduced for the hospitality sector. This rate will continue until 30 September 2021, when a hybrid rate of 12.5% will be introduced for a further six months before returning to 20% in March 2022.

Are you accounting for VAT correctly?

Consider the VAT implications of a dine at home box: a three-course menu, some of which is designed to be eaten cold, some hot, along with a bottle of red wine for good measure, and not forgetting a handsome delivery charge.

Potentially, each of these items has a different rate of VAT and so there needs to be careful consideration as to how the offering is held out for sale to achieve the best possible commercial decision.

Is there a meal deal for a set price? Could ‘buy X and Y with the option of Z for a nominal amount’ work? How about a free item if others are purchased?

All the above options have the same outcome for the customer but have very different considerations from a VAT perspective. Therefore, the most suitable model should be adopted to meet the needs of your business and operations. 


For further information on VAT in the hospitality sector, or for any other business advice, please contact Sally Jones on 0113 2211356 or email sally.jones@armstrongwatson.co.uk.

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