Changes to Hospitality VAT Rates

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In June 2020 the government introduced a temporary VAT rate reduction for the supply of the following services:

  • Hot and cold food in restaurant or take-away
  • Non-alcoholic beverages
  • Hotel and holiday accommodation, including caravan parks, tents and related facilities

This VAT reduction was intended to provide the hospitality sector with support after being impacted by the various Covid restrictions that have been in place, and the government has taken a phased approach in returning to the standard rate, by first extending the 5% VAT rate and secondly by introducing a 12.5% rate prior to returning to the VAT regime in place before mid-June 2020.

The second phase of VAT reduction commences 1st October 2021 when the VAT rate for most goods and services within the hospitality industry will increase from 5% to 12.5%. This will be a temporary rate until the 31st March 2022 when it will revert back to the standard VAT rate of 20%.

How should you prepare your business for the VAT rate changes?

First, you need to ensure that your business is ready to update the point of sales systems to reflect the changes to the going VAT rate. Ensuring the VAT rate is adjusted prior to processing any sales on the 1st October will ensure you are able to provide accurate VAT invoices. Timely changes to your tills will prevent retrospective adjustments to your return, which could impact your profitability.

Secondly, it could be time to consider if the changes to the VAT rate will also require a review of your sales prices to ensure this does not impact your overall profitability. Don’t forget to update your website or menu prices if any changes are required.

It is also worthwhile setting a reminder in Mid-February 2022 to ensure you are prepared for a further round of changes expected on 01/04/2022.

Flat rate VAT scheme

If your business is on a flat rate VAT scheme there will be changes to consider too, as this will also be subject to change:

15/07/20-30/09/2021

01/10/21 – 31/03/2022

Hotel accommodation

0%

5.5%

Catering, restaurants & Take-away

4.5%

8.5%

Pubs

1%

4%

Could your business benefit from a trusted adviser who prepares your VAT returns and keeps you up to date with the latest changes to VAT legislation? Have you considered outsourcing one or multiple finance business processes, why not take the opportunity to speak to us to discuss your options?


Get in touch with Guy for more information by emailing guy.kerkvliet@armstrongwatson.co.uk or call 0808 144 5575

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