VAT boost for hospitality

Many hospitality venues have been closed for almost a year and are still unable to open under the Covid-19 restrictions. To help them survive this period, the Government has given them a 15% VAT reduction on most sales. Where the business would normally collect 20% in VAT they currently only have to pay 5%.

This 5% VAT rate has applied in the hospitality and tourism sectors since 15 July 2020 and will continue to apply until 30 September 2021. This will then gradually increase with sales made from 1 October 2021 to 31 March 2022 in these sectors adding 12.5% before returning to the usual 20%.

These reduced VAT rates broadly cover restaurant meals or hot take-away meals (not sandwiches); hotel and similar accommodation; entrance fees for tourist attractions and cultural venues. The lower rate does apply to soft drinks taken with a restaurant or café meal eaten in-house.

The reduced VAT rates do not apply to tickets for sporting events nor admission to sporting facilities, so bookings to use a tennis court or five-a-side football pitch are still subject to 20% VAT.

A special low rate applies to gross sales under the VAT flat rate scheme for small businesses, such as pubs, hotels and catering services. The flat rate scheme rules will be revised to take account of the 12.5% rate that applies until 31 March 2022.

Spring Budget 2021 – VAT