Read our updated guide to the temporary VAT reduction rate for the UK hospitality and tourism industry
Understand the temporary VAT cut, the new extension date, who it affects, and what to do next.
Why has the VAT rate been temporarily changed for some businesses?
Lockdown conditions were enforced to help slow the global and national spread of coronavirus COVID-19. Unfortunately for businesses reliant on social contact, such as the property and hospitality sectors, this meant significant disruption. To help them recover, the government are introducing a series of measures of part of their COVID-19 economic recovery plan.
When does the temporary VAT rate start and end?
The temporary VAT rate reduction took effect from 15th July 2020. It was originally planned to end on 12th January 2021, and then extended until 31st March 2021 for eligible businesses.
The temporary reduction for VAT has been extended again for the April 2021 – April 2022 tax year.
The temporary VAT rates and dates
VAT temporarily reduced from 20% to 5% for eligible businesses
15th July 2020
Temporary VAT rate of 5% ends
30th September 2021
Temporary VAT rate of 12.5% begins
1st October 2021
Temporary VAT rate cut ends
31st March 2022
Does the temporary VAT rate cut affect the VAT Flat Rate Scheme?
Yes, it does. The temporary changes mean that some rates covered by the VAT Flat Rate Scheme (FRS) have changed. This enables VAT FRS users to benefit from the temporary reduction in the standard VAT rate as well. HMRC will update the list of VAT flat rates to show the temporary cut.
Who does the temporary change in VAT affect?
The VAT cut affects VAT registered businesses in certain sectors, and their customers. The government describe it as being for the benefit of:
“Organisations that make supplies of hospitality, hotel and holiday accommodation and admission to certain attractions, and their advisers.”
If you’re VAT registered, and normally charge VAT at the standard rate on the items below this applies to you.
If you ‘make a supply’ of the items listed below between 15th July 2020 and 30th September 2021, then you should charge VAT at 5%. Between 1st October 2021 and 31st March 2022, charge VAT at 12.5%.
Food or non-alcoholic drinks which are sold and consumed on the premises (restaurants, cafes and pubs, for instance)
Hot takeaway food and non-alcoholic drinks
Sleeping accommodation which includes hotels and B&Bs or similar
Pitch fees for caravans and tents, and associated facilities