Great British Summer Savings Scheme (or will it be?): What you need to know about the temporary VAT reduction…

The UK Government has announced a temporary reduction in VAT which it has said is aimed at lowering the cost of family leisure activities during the summer holidays in response to lobbying from the tourism sector.  

Chris Scargill, our Tourism and Leisure specialist partner, has said: “The reality is that with the bruising many of the targeted businesses have had from a number of legislative changes that have added a cost burden to them, the majority of independent businesses are unlikely to pass on all of the potential benefit the Government is hoping for”. 

There has been a recurring call for the lowering of the VAT rates on Tourism Leisure and Hospitality sector, with the UK having the second highest rate of VAT across Europe.

Larking Gowen’s Joanna Burton – a specialist advisor to the sector - added that: “in the recent 2026 Tourism Survey, 84% of businesses said a VAT rate reduction was needed to make the industry in East Anglia more sustainable”.  Confirming that “45% of respondents agreed a reduction in VAT would allow breathing space, considering current business costs and regulatory pressure”.

The survey – now in its 20th year - also highlighted that while 49% of respondents indicated that some of the benefit of a VAT reduction would be passed on to customers, 27% said it would not, while the remaining 23% were not sure.

What is changing and when?

As part of the wider “Great British Summer Savings” campaign, a temporary reduction in VAT from 20% to 5% will apply to a range of family-orientated activities and services that take place from Friday 25 June 2026 through to 1 September 2026.

Who does this affect?

The reduced rate is aimed at consumer-facing businesses targeting families with children. This includes:

• Restaurants, cafés, and catering businesses
• Cinemas, theatres, and performance venues
• Theme parks, zoos, soft play centres, and similar attractions
• Museums and cultural venues
• Event organisers and exhibition operators

What is covered by the 5% rate?

• Children's menu meals served in restaurants for consumption on the premises (Importantly, these do not need to be consumed by a child).  The defining feature is that the meals are served from a distinct children’s menu and marketed, presented and priced as children’s meals.
• Children's and family tickets for cinemas, theatres, concerts, shows and exhibitions; and
• Admission tickets for both children and adults for attractions including amusement parks, fairs, museums, zoos, soft play centres, circuses, adventure parks, nature reserves, wildlife parks and observation attractions. These must be suitable for families with children.

Key considerations for businesses

While the headlines are positive, the reality for businesses is less straightforward. From a practical perspective, businesses will need to make several key decisions in a very short space of time.

1. Pricing
   One of the most immediate considerations is pricing strategy.
   • While the measure creates an opportunity to lower prices and attract additional customers, there is no obligation for businesses to pass the savings on.
   • Businesses will need to decide whether the opportunity to reduce prices afforded by the VAT reduction will drive increased footfall or whether the rate change provides an opportunity to retain some, or all, of the benefit to help offset rising operating costs during their peak trading months.
   • If prices are discounted for the period permitted, marketing and EPOS systems will need to be updated so that the change can be reflected correctly in reporting. 
   • If it is decided that prices will not be discounted and instead the business will retain additional income, the VAT returned to HMRC will need to account for the 5% rate, and therefore records will need to be retained to evidence what sales have been made that qualify for the temporary reduction.
   
   
2. Eligibility
   Identifying which sales fall within the temporary reduced rate and which do not will be a time critical issue.
   • As yet, the detailed statutory instrument has not been released so the only information businesses have to work with is HMRC’s Brief 5/2026.
   • Worryingly, HMRC’s Brief includes some apparently contradictory wording and is less clear than is needed to ensure full compliance with the new rules.
   • It is important to note that HMRC can enquire at any time (generally) up to 4 years after submission of the relevant VAT return, so records will need to be maintained the can prove the reduced rate was applied correctly. 

Gillian McGill, VAT Director, commented that: “We know from previous experience - for instance - in respect to the COVID VAT reduction and subsequent HMRC enquiries, that for this change, businesses might benefit by retaining copies of menus for the relevant period and also evidence that admissions were to events marketed, priced, and presented as intended for children. These could provide useful evidence in the future should HMRC challenge the VAT applied.”

In our view, realising the benefits of the reduced VAT rate will depend on how quickly and effectively the necessary operational changes can be made. 

Systems, pricing models and internal processes will all require updates to ensure the correct 5% VAT rate is applied. With the very limited lead time, this is likely to place additional pressures on management, finance, and front-line teams.

How we can help?

Larking Gowen is on hand to support businesses through this transition by helping to:

• Identify which products and services qualify for the reduced VAT rate
• Apply the appropriate VAT treatment to complex bundled or mixed supplies
• Navigate pricing decisions to strike the right balance between demand and profitability
• Maintain compliance with HMRC guidance while minimising risk
• Implement system and software updates to support a smooth transition both ahead of 25 June and following 1 September

Need help?

If you would like to discuss the wider implications of this announcement, please get in touch with your usual Larking Gowen contact or Chris Scargill or Joanna Burton.

Gillian McGill, Chris Scargill & Joanna Burton