Food, Accommodation and Attraction VAT Rate cut to 5%

Coronavirus, VAT,

Hospitality has been one of the industries hardest hit by Coronavirus. The Chancellor outlined a range of measures to overcome this impact as part of his Summer Economic Update. To support the businesses in the hospitality sector specifically, Rishi Sunak announced a temporary reduction in VAT to 5% for Food, Accommodation and Attractions from Wednesday 15th July until the 12th January 2021.

The reduction doesn’t apply to everything that these businesses may be selling. so it’s important to be clear on where it applies, and where it doesn’t!

Who does the temporary VAT rate cut apply to?

1. Hospitality – Restaurants, cafes and pubs.

  • eat in:
    • hot and cold food
    • hot and cold non-alcoholic drinks (Alcohol remains at 20%)
  •  take-away:
    • hot food (cold food and cold drinks are zero-rated when sold as take-away)
    • non-alcoholic drinks (Alcohol remains at 20%)

You can find more guidance from HMRC here.

2. Hotel and holiday accommodation – e.g. Hotels, Bed and Breakfasts, boarding houses, holiday accommodation, caravan and camp sites.

  • Sleeping accommodation, including bathrooms, living rooms
  • Rooms with sleeping accommodation
  • Rooms provided for catering
  • Long stays up to 28 days (for more than 28 days a reduced rate is used – see guidance)

You can find more guidance from HMRC here.

3. Admissions to certain attractions – e.g. A planetarium, botanical gardens, studio tours, factory tours.

  • Entry to attractions that are currently 20%
  • It does NOT apply to sporting events.
  • Incidental food and drink can be included in the 5% calculation
  • Live online performances (if they aren’t covered by cultural events exemption)

You can find more guidance from HMRC here.

 

If you’re using Xero (or other bookkeeping software) you’ll need to make the necessary amendments to your system to take account of the change in VAT rates.

Make sure you set up a reminder to change everything back for the 12th January too!

Here’s how to update Xero. If you have any questions about how to update your system or about the VAT change in general, please do get in touch.