COVID-19: 5% VAT hospitality rate

• On 8 July 2020, HMRC published new guidance on the temporary reduction in the VAT rate from 20% to 5% for supplies relating to hospitality, holiday accommodation and certain attractions.
• From 15 July 2020 to 12 January 2021, the reduced (5%) rate of VAT will apply to these supplies subject to meeting the criteria set out in the guidance.
• The following notices have also been updated to reflect this change:
  • Food products (VAT Notice 701/14)​
  • Catering, takeaway food (VAT Notice 709/1)
  • Hotels and holiday accommodation (VAT Notice 709/3)​
  • Land and property (VAT Notice 742)​
  • Tour Operators Margin Scheme (VAT Notice 709/5)​
• The Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 gives these changes their legal basis.
• The guidance also confirms that the relevant flat rate percentages for categories covered by the reduced rate will be adjusted temporarily. Further details are expected to be published in due course.
• There may be situations where you receive payments or issue invoices before 15 July 2020 for supplies that take place on or after 15 July 2020.
  • More information about this can be found in sections 30.7.4 to 30.9.2 of VAT guide (VAT Notice 700).

See the brief addressing this change here.

The new guidance can be found here.

Aspire Comment

This is a significant reduction that will benefit all those who fit the criteria. It is encouraging to see that Government are continuing to introduce new measures to encourage businesses to get back up and running, as well as retain the staff that have been subject to furlough.

If have any queries about how these VAT percentages will affect your business or any other employment tax queries, please get in touch with one of our advisors on 0121 445 6178 or email enquire@aspirepartnership.co.uk.