Hospitality industry ― temporary reduced rate from 15 July 2020 to 31 March 2022

Produced by Tolley
  • (Updated for Budget 2021)

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Hospitality industry ― temporary reduced rate from 15 July 2020 to 31 March 2022
  • What catering supplies are covered by the reduced rate?
  • Retail schemes
  • Which hotels and what holiday accommodation etc are covered by the reduced rate?
  • Catering supplied with accommodation
  • Wedding packages
  • Holiday accommodation
  • Time-share and other multi-ownership schemes
  • Camping and caravans
  • Retention fees
  • More...

Hospitality industry ― temporary reduced rate from 15 July 2020 to 31 March 2022

In response to the pressures on businesses caused by the coronavirus (COVID-19) crisis, a temporary reduced rate was introduced for certain supplies in the hospitality sector from 15 July 2020. This temporary reduced rate currently runs to 31 March 2022 (having been extended on multiple occasions). However, from 1 October 2021 to 31 March 2022, a reduced rate of 12.5% replaces the 5% rate. Following this incremental increase in the VAT rate, it is expected that the standard rate will once again apply from 1 April 2022.

Broadly speaking, the temporary reduced rate covers the following categories of supply:

  1. catering and hot takeaway food

  2. sleeping accommodation in hotels and similar, campsites etc

  3. admission fees charged to enter attractions that are not eligible for the cultural exemption

VATA 1994, Sch 9, Group 1, paras (f), (g); SI 2020/728; VATA 1994, Sch 7A, Groups 14–16; SI 2020/728; SI 2020/1413; De Voil Indirect Tax Service V4.423

This guidance note explores what is covered by the temporary reduced rate and considers various other challenges and opportunities associated with the temporary measure for businesses.

What catering supplies are covered by the reduced rate?

This section should be read in conjunction with the Food ― catering guidance note.

The temporary reduced rate applies to supplies of:

  1. hot and cold food for consumption on the premises on which they are supplied (including food and drink supplied from vending machines)

  2. hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied

  3. hot takeaway food for consumption off the premises on which they are supplied (including hot takeaway food that is delivered ― see ATT ― VAT: temporary reduced rate for hospitality, holiday accommodation and attractions)

  4. hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied

The reduced rate does not cover the following, which remain standard-rated:

  1. supplies of food and drink that are supplied for consumption

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