Reduced VAT rate for hospitality changed to 12.5%

The reduced VAT rate for hospitality at 5%, which originally began on 15 July 2020, is changing to 12.5% from 1 October 2021.

In response to the Covid pandemic, the government announced in July 2020 a temporary reduced rate of VAT will apply at 5% for certain supplies relating to hospitality, hotel and holiday accommodation, alongside admission to certain visitor attractions.

Originally due to end on 12 January 2021, the 5% rate was extended to 31 March 2021 and subsequently further extended to 30 September 2021.

Form 1 October 2021, a transitionary rate will apply at a new reduced rate of 12.5% this will apply until 31 March 2022, following this the rate will revert to the standard rate of 20%.

Which businesses are eligible for the reduced VAT rate for hospitality?

The standard rate of VAT had previously applied to the majority of goods and services which were supplied by the tourism & hospitality sectors. Groups 14, 15 and 16 were transferred into what is known as ‘Schedule 7A VATA’ at the point when the temporary reduced rate became applicable. This resulted in the following attracting the 5% reduced rate, which is defined by HMRC as follows:

“Hospitality: – defined as the supplies in the course of catering including supplies of hot & cold food & drink to be consumed on the premises and supplies of hot takeaway food & drink to be consumed off the premises”

“Accommodation: – defined as the provision of hotel & holiday accommodation, pitch fees for caravan parks and tents & related facilities”

“Attractions: – defined as the admission to attractions not covered by the cultural exemption”

Alexander & Co – expert advice to the hospitality Industry

We have considerable experience in the hospitality sector, working with a wide range of clients across the UK, from independent operators to national chains, from coffee shops to Michelin Star restaurants. With a deep understanding of the issues facing the sector, Alexander & Co have a specialist team of advisors to assist you.

We advise on accountancy, tax and business growth advice for the hospitality industry. Further information on our services can be found here.

For further information on how we can help your business, please call us on 0161 832 4841, email info@alexander.co.uk or fill out the contact form on this page and we will be in touch.