Temporary reduction in the VAT rate

Temporary reduction in the VAT rate for hospitality businesses

The Chancellor has today announced further measures to assist with job retention and to help stimulate business and the economy as business begin to open up after the Covid-19 lockdown.

To help businesses in the tourism and hospitality industries VAT will be temporarily reduced from 20% to 5% on certain supplies made within these in industries.

The temporary reductions of VAT apply to all four countries in the UK and will be in operation for just about 6 months, beginning 15 July 2020 and ending 12 January 2021. 

Hospitality Sector

In the hospitality sector the temporary reduction in VAT will apply to the sale of food, including eat-in and hot take-away food, and non-alcoholic drinks served in or sold from restaurants, pubs, bars, cafes, and other similar establishments. Cold take-away food will continue to be to be zero-rated as usual.

However, alcoholic drinks are not included in the temporary reduction of VAT and will remain subject to VAT at 20%.

In the tourism sector the temporary reduction in VAT will apply to supplies of accommodation in hotels, B&Bs, campsites and caravan sites as well as to entry to attractions such as cinemas, zoos and theme parks.

While this will be welcomed by the industry, the introduction of 5% on some sales made by businesses whose sales are usually all standard-rated, such as a pub, this will undoubtedly create additional record keeping requirements as those business will need to introduce method to identify the breakdown of their sales between standard-rate and the temporary 5%.

[contact-block]

Related News Articles

HMRC’s New R&D Disclosure Service: What You Need to Know

A new disclosure facility has been introduced to help companies address inaccuracies in historic R&D tax relief claims. Who is affected, and how should you use this facility if necessary? Due to the prevalence of errors and fraudulent claims in R&D tax relief, HMRC has set up a new disclosure facility for overclaimed relief. This…

Private School VAT FAQ

What has Changed? From 1 January 2025, all supplies of education, vocational training, and board & lodge made by a private school will be subject to VAT at the standard rate (20%). The draft legislation defines a private school as a school/institute that provides full-time education for pupils of compulsory school age (and those up…

UPDATE: Fuel Rates for Company Car Drivers

The reimbursement rates for employees using company cars for business travel have been updated as of 1 September 2024. These Advisory Fuel Rates (AFRs), set by HMRC, are revised every quarter to reflect changes in fuel prices. The AFRs specify the maximum amounts that can be reimbursed to employees for business mileage in a company…