Changes coming in 2022 for VAT

End of COVID VAT Deferred Payments

All UK VAT registered businesses had the option of deferring any VAT payments due between 20 March 2020 to 30 June 2020. They could opt in to make smaller interest free payments up until 31 March 2022.
Liabilities that are still outstanding under the scheme need to be settled by 31 March 2022, any amounts unpaid after this date could be subject to interest and/or penalties.

End of temporary reduced rate for hospitality

Back in July 2020 the VAT rate for the hospitality sector was reduced to 5% for –

  • Restaurants
  • Pubs
  • Bars
  • Cafes
  • Hotels and holiday accommodation

The rate was then increased to 12.5% from 1 October 2021. From 1 April 2022 the rate will return to 20%.

Businesses will need to ensure their tills/software are ready to facilitate the change.

There are still opportunities for VAT savings before the reduced rate ends by bringing tax points of supplies forward, this could be achieved by –

  • Receiving payments for supplies before the reduced rate ends for supplies to be made after the reduced rate ends
  • Issuing a VAT invoice before the rate increases to 20%

For example a hotel may be offering accommodation for summer 2022 (after the VAT rate increases to 20%). If the hotel receives a deposit or payment in full for a stay in summer 2022 before 31 March 2022 they can account for the VAT at the reduced rate of 12.5%.

They could also issue a valid VAT invoice for the stay in summer 2022 before 31 March 2022, even if payment is not yet received. The issuing of an invoice will create a tax point on the date it is raised therefore the VAT can be accounted for at the reduced rate.

Making Tax Digital becomes Mandatory for all UK VAT registered businesses

Making Tax Digital for VAT will become mandatory for all UK VAT registered businesses for VAT periods starting on or after 1 April 2022. For further information on these requirements please see:  


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