Which businesses are eligible for the VAT rate cut?

In the Summer Economic Statement in July, the Government announced a temporary VAT rate cut of 5%, from 15 July 2020 until 12 January 2021, for certain supplies in the hospitality and leisure sector.

Who’s eligible for the reduced VAT rate?

Accommodation

You’ll benefit from the temporary VAT rate cut if you:

• supply sleeping accommodation in a hotel or similar establishment
• make certain supplies of holiday accommodation
• charge fees for caravan pitches and associated facilities
• charge fees for tent pitches or camping facilities

Food & drink

Businesses such as restaurants, cafés and pubs that supply food and non-alcoholic drinks for customers to consume on their premises are all eligible for the VAT rate cut.

You’ll also be able to charge the reduced rate of VAT on your supplies of hot takeaway food and hot takeaway non-alcoholic drinks.

Attractions

If you charge a fee for admission to certain attractions where the supplies were standard rated, you will only need to charge the reduced rate of VAT between 15 July 2020 and 12 January 2021.

However, if the fee you charge for admission is currently exempt, that will take precedence and your supplies will not qualify for the VAT rate cut.

The Flat Rate Scheme

If you’re a small business and use the Flat Rate Scheme to simplify your VAT calculations, you should be aware that certain percentages have been reduced in line with the introduction of the temporary VAT rate cut.

In some cases, it may be worth considering the benefits of remaining in the Flat Rate Scheme, or not, in order to take full advantage of the reduced VAT rate. However, you would need to consider the impact of the next 12 months as you cannot rejoin the Flat Rate Scheme for 12 months once you have left, and the VAT rate cut is currently only in place for six months.

If you have any questions on the VAT rate cut or the Summer Economic Statement, please get in touch with your usual MHA Larking Gowen contact. You can find contact details on the Our People section of the MHA Larking Gowen website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Julia Dickens