Are you ready for the Hospitality VAT rate change?
On 15th July 2020 the Government lowered the rate of VAT relating to tourism and hospitality from 20% to 5% as a way of supporting businesses severely affected by the pandemic.
It was initially only planned to last until 12th January 2021, but after being extended twice, it will now change on 30th September 2021 where it will rise to 12.5% until 31st March 2022 where it is thought to return to 20%.
What is included in this rate group?
This included food and drinks consumed in restaurants, cafes and pubs, hot takeaway food, holiday accommodation and admission to many attractions.
How will this affect me?
If you are a hospitality business, have you set up the new 12.5% rate on your invoicing software? The prices you pay for your ingredients or services might go up. You may need to work out new prices for your menus to account for the rise. If you aren’t a hospitality business but have events planned, the VAT and possibly the cost of the event could go up from 1st October.
It’s worth noting that there is currently no rule that stops you from paying for a service (or putting down a deposit) in advance of holding the event, e.g. being invoiced and making payment before 30th September on an event or service after that date means you’d only pay the 5% VAT rate. This is most beneficial for companies that can’t recover all the VAT they pay.