COVID-19: The Chancellor announces further VAT measures to support businesses

25 September 2020| CATEGORIES: Covid measures, VAT rates| TAGS: Covid measures, VAT rate cut

Following a resurgence in the number of COVID-19 cases in the UK, Rishi Sunak yesterday announced further VAT measures to support the economy in his Winter Economy Plan statement.

The measures are an extension of those announced earlier in the year of a temporary VAT rate cut for the UK hospitality and tourism sectors and a three-month deferral for VAT payments to support businesses through the period of disruption caused by COVID-19.

Temporary VAT rate for hospitality and tourism

The Government is extending to 31 March 2021 the temporary VAT reduced rate of 5% that was due to end on 13 January.  The reduced rate will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.

VAT deferral “New Payment Scheme”

VAT payments deferred from earlier this year were due to be paid in full in March 2021. Businesses which deferred VAT due in March to June 2020 will now be given the option of spreading their payments over 11 instalments in the 2021- 2022 financial year, with no interest payable.

All businesses which took advantage of the VAT deferral are eligible to use this “New Payment Scheme”. HMRC will put in place a process for businesses to opt-in in early 2021.

We will provide further information on this once the HMRC guidance has been published.