Tax
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Temporary VAT changes to Hospitality Sector

Luke Millar

Temporary VAT changes to Hospitality Sector

Are you a VAT registered business in the tourism or hospitality sector?

Then this applies to you; as of 1st October 2021, a new temporary VAT rate of 12.5% will be introduced and expires on 31st March 2022. 

The story so far 

On 8th July 2020, HMRC announced a temporary VAT rate of 5% to support the tourism and hospitality sector affected by closures and social distancing measures brought about by COVID-19. 

However, this reduced rate is due to expire on 30th September 2021, at which point HMRC will use a transitioning rate of 12.5% from 1st October to 31st March 2022!  

This temporary 12.5% VAT rate will apply to: 

  • The sale of hot and cold food for consumption on the supply premises 
  • Non-alcoholic beverages for consumption on the premises in which they are supplied 
  • Hot takeaway food and hot non-alcoholic beverages for consumption off the premises where they are supplied 
  • Sleeping accommodation in a hotel or similar establishment 
  • Admission to certain attractions 

Passing on the VAT rate reduction to customers 

The extra good news is that you are not required to pass on the VAT rate reduction to the customer; if you don’t want to, you have the option to keep prices as they are and use this saving to improve your cash flow and profit margins. Alternatively, you have the flexibility to pass on the saving if you need to remain competitive in the short term – its entirely up to you  

Remember, these rates don’t apply to us beer drinkers, as this temporary rate does NOT apply to alcoholic drinks!  

If you are looking for more information, please get in touch with us today. 

Source: HMRC


Written By Luke Millar.

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