VAT cut in bid to support hospitality sector

8 July: VAT on eating out, accommodation and tourist attractions will be cut to 5% to help the UK’s hospitality sector recover from the impacts of the coronavirus pandemic.

In his Summer Statement, the Chancellor announced a six-month reduction in the VAT rate on supplies of food and non-alcoholic drinks from restaurants, pubs, bars and cafés, as well as to supplies of accommodation and admission to tourist attractions.

The rate cut from 20% to 5% will take effect on 15 July 2020 and will be in place until 12 January 2021 to support businesses and jobs in the hospitality sector across the UK.

Further guidance on the scope of the reliefs will be published by HMRC in the coming days. Until then it is not clear how the VAT paid on pre-booked holidays and advanced tickets will be dealt with, although normal rules on a reduction in VAT rate suggest that the lower rate may be available.

Clarity is also needed on how the VAT change will interact with the government’s new ‘Eat Out to Help Out’ scheme, which was also announced in the Chancellor’s update. This scheme will see the government provide participating businesses with half of the cost up to £10 per head for eat-in meals sold Monday-Wednesday throughout August.