The reduction in the standard VAT rate from 20% to 5% will be effective from 15 July 2020 to 12 January 2021 for certain supplies of hospitality, hotel and holiday accommodation and, admissions to certain attractions.
The following supplies will benefit from the temporary 5% reduced rate of VAT:
- Food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs
- Hot takeaway food and hot takeaway non-alcoholic beverages
- Sleeping accommodation in hotels and similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities
- Admissions to the following attractions that are not already eligible for the cultural VAT exemption such as: Theatres, Circuses, Fairs, Amusement parks, Concerts, Museums, Zoos, Cinemas, Exhibitions, similar cultural events and facilities
Where admission to these attractions is covered by the existing cultural exemption, that exemption will take precedence.
What operational impacts should you be considering?
- Your accounting systems will need to be updated to reflect the new rate of VAT; most systems already have a 5% VAT rate as an option to apply
- Consider will your sales prices remain the same or, will you pass on this saving to your consumers? This is at the discretion of the business owner(s)
- Update your invoices if necessary, if the change is not automatic as part of your accounting system
- Consider the timing of the supply of service or goods. For deposits or advances received before the rate change, you may still be able to apply the new rate of VAT, if the supply is to be provided between 15 July 2020 and 12 January 2021
Please contact us if you have any questions about how this will affect your business.