More detail on VAT rate cut for hospitality
13 July 2020: HMRC has issued guidance on the temporary reduced rate of VAT for hospitality, holiday accommodation and attractions. ICAEW’s Tax Faculty provides an overview and highlights updated VAT notices.
Following the Chancellor’s Summer Statement, HMRC has issued guidance on the application of the temporary 5% reduced rate of VAT to support the hospitality sector.
The rate cut applies to certain supplies of hospitality, hotel and holiday accommodation and admission to certain attractions from 15 July 2020 to 12 January 2021. HMRC’s guidance confirms that the temporary 5% reduced rate of VAT will apply to the supply of:
- food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs;
- hot takeaway food;
- hot takeaway non-alcoholic beverages;
- sleeping accommodation in hotels or similar establishments;
- holiday accommodation; and
- pitch fees for caravans and tents, and associated facilities.
The 5% reduced rate will also apply to admissions to the following attractions that are not eligible for the cultural VAT exemption:
- theatres,
- circuses,
- fairs,
- amusement parks,
- concerts,
- museums,
- zoos,
- cinemas,
- exhibitions, and
- similar cultural events and facilities.
Where admission to these attractions is covered by the existing cultural exemption, the cultural exemption will take precedence.
The VAT rules for this sector are already complex with a variety of VAT regimes applying. As a result of the temporary reduction in the VAT rate, HMRC has updated several of its VAT notices to provide more detailed guidance on the application of the change in areas particularly affected by the rate reduction. This highlights the difficulty that some businesses face in implementing the rate change at short notice.
This guidance can be accessed using the following links:
- VAT: reduced rate for hospitality, holiday accommodation and attractions
- Catering, takeaway food (VAT Notice 709/1)
- Hotels and holiday accommodation (VAT Notice 709/3)
- Food products (VAT Notice 701/14)
- Tour Operators Margin Scheme (VAT Notice 709/5)
- Land and property (VAT Notice 742)
There is also guidance available for the Eat Out to Help Out Scheme which highlights that VAT will be based on the full amount of the customer’s bill. This is on the basis that the Eat Out to Help Out Scheme is a form of payment towards the meal and the value of the meal is unchanged. The payments received by the business will be taxable on the same basis.