New VAT rate for hospitality and tourism with effect from 1 October 2021

22 September 2021| CATEGORIES: Covid measures, COVID-19, hospitality and tourism, VAT rates| TAGS: Covid measures, hospitality, VAT News

The VAT rate that applies to certain supplies of hospitality, hotel and holiday accommodation, and admission to certain attractions changes on 1 October 2021.

Background

On 8 July 2020, the government announced that it would introduce a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions. This came into force on 15 July 2020. These changes were brought in as an urgent response to the coronavirus (COVID-19) pandemic to support businesses severely affected by forced closures and social distancing measures.

The Chancellor of the Exchequer announced on 24 September 2020 that the temporary reduced rate for tourism and hospitality would be extended to 31 March 2021.

At Budget 2021 the Chancellor announced that the temporary reduced rate of 5% would be extended again until 30 September 2021. From 1 October 2021 the reduced rate for these supplies would be replaced by the introduction of a new reduced rate of VAT of 12.5% to remain in effect until 31 March 2022.  The VAT rate will revert to the standard rate of 20% from 1 April 2022.

Affected supplies

The change affects the following supplies:

• 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 or 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, the exemption will take precedence.

As a result of this change, from 1 October 2021 the UK will have 4 rates of VAT – 20%, 12.5%, 5% and 0%.

Please get in touch if you are affected by this change and require further information.