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Temporary reduced rate of VAT for hospitality and tourism sector

In the Chancellor’s Summer Statement, it was announced that a targeted reduced rate of VAT would be introduced, aimed at some of the sectors hardest hit by COVID-19 – hospitality and tourism. Such supplies, currently standard rated at 20%, will be subject to VAT at 5%. The new rate will apply from Wednesday 15 July 2020 and will run until 12 January 2021.

The types of supply covered include food and non-alcoholic drinks consumed in restaurants, pubs, bars, cafés and similar premises across the UK and hot takeaway food and non-alcoholic drinks by those businesses. The reduced rate of VAT will also apply to supplies of hotel and holiday accommodation and admission to attractions across the UK.

This temporary reduced rate will create a significant benefit for much of the hospitality and tourism sector, although it is important to note the temporary reduced rate does not apply to alcoholic drinks and will therefore not significantly benefit pubs that do little or no food.

Businesses will be aware that the current rules regarding food and drink sales are complex and this change gives little time to amend systems.  There is also the added complexity around the mismatch between the temporary reduced rate period and VAT accounting periods.  We can offer our support and guidance on this so please get in touch if you need assistance.

Further details can be found in Revenue and Customs Brief 10 (2020): temporary reduced rate of VAT for hospitality, holiday accommodation and attractions.  Within this Brief there is also a link to further guidance on the scope of the reduced rate for each of the three categories.

In order to further help restaurants, cafés, pubs or other food establishments the Government has also announced a new ‘Eat Out to Help Out’ scheme which is now open for registrations. Find out more here.

To discuss how these changes affect your leisure business or for any VAT queries, you can contact our VAT Taxperts via [email protected] or call one of our offices. Alternatively, you contact our EQ Leisure team via [email protected].

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