Hospitality and Leisure: VAT Rate Cut

The Chancellor has announced a temporary cut to the rate of VAT from 20% to 5% which will be welcomed by Britain’s hospitality sector, clearly hit extremely hard by the Covid-19 Pandemic and associated ‘lockdown’ measures.

With effect from next Wednesday, 15 July 2020, the rate of VAT on food, accommodation and various attractions will be reduced from the standard rate of 20% to the reduced rate of 5%.  The reduced rate will apply until 12 January 2021.

The reduced rate will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and ‘similar premises’ across the UK.

It should be noted that the sale of alcoholic beverages has been excluded from this measure.

In addition, the Chancellor announced that the reduced rate will apply during the same period to supplies of accommodation and admission to attractions across the UK.

HMRC have stated that further guidance on the scope of this relief will be published in the coming days.

At this stage, it is not clear whether ‘similar premises’ will extend to venues such as members’ sports clubs and so on but it assumed that the measure will be applied as widely as possible to assist all those entities affected by the lockdown measures.  Similarly, it is not known for certain whether ‘attractions’ will extend to the sale of tickets for ‘live’ performances and events, for example.  Again, it is hoped that such issues will be clarified by the promised guidance.

In the meantime, businesses which are certain to be affected by the measure such as pubs and restaurants should consider changes to their till systems.  It would clearly be prudent to determine whether or not they will be able to differentiate between the rates of VAT which will apply to the various items being sold.

For further guidance on such matters and any other VAT related matters, please contact your local Baldwins partner or one of our specialists here