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

Produced by Tolley
  • (Updated for Budget 2021)
Hospitality industry ― temporary reduced rate from 15 July 2020 to 31 March 2022

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
  • How do you prepare for a change in VAT rate?
  • VAT fraction
  • Deposits / advance payments and supplies spanning a VAT rate increase
  • Debits, credits and refunds
  • What catering supplies are covered by the reduced rate?
  • Retail schemes
  • What hotels and holiday accommodation, etc are covered by the reduced rate?
  • Catering supplied with accommodation
  • Wedding packages
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

The Government announced at Budget 2021 that the reduced rate for the following was being extended to 31 March 2022 and that from 1 October 2021 to 31 March 2022, a new reduced rate of 12.5% would replace the existing 5% reduced rate:

  1. supplies of 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; Finance Bill 2021, cls 92, 93; De Voil Indirect Tax Service V4.423; HMRC Brief 10(2020)

More details on what is covered by the reduced rate can be found below.

How do you prepare for a change in VAT rate?

As stated above, a new reduced rate comes into effect from 1 October 2021 which is intended to ease the burden on businesses by gradually increasing the rate of VAT back up to the standard rate. The dates and applicable VAT rates are as follows:

15 July 2020–30 September 20215% VAT
1 October 2021–31 March 202212.5% VAT
1 April 202220%

Whilst an incremental increase in the rate will be welcomed by most businesses, it does result in an increased administrative burden, as businesses will once again need to prepare for a change in the VAT rate on 1 October 2021 and on 1 April 2022.

In preparing for the change in the VAT rate, businesses should consider the following

Popular documents