5% Reduced VAT rate for the Hospitality sector

The Chancellor has announced a cut in the rate of VAT from 20% to 5% for the hospitality sector including –

• Restaurants
• Pubs
• Bars
• Cafes
• Hot takeaway food

The reduced rate applies to food, accommodation and non-alcoholic beverages starting from Wednesday 15 July 2020 until 12 January 2021.  

This change is  a much needed break for the sector but could prove challenging for some given the short timescale to introduction.

Some things to consider: –

• The need to distinguish for the first time the different VAT rates applying to alcoholic and non-alcoholic drinks.
• Software and till updates necessary to facilitate the change.  Good news is that we already have a 5% reduced rate for VAT in place so most systems will have this rate built in. Best to contact providers as soon as possible to understand what changes are needed.
• Deposits, it may be possible to charge the lower rate of VAT on deposits if the sale is taking place after the change.
• If you intend to reduce prices consider the impact on cash flow and existing VAT liabilities.
• The interaction between the reduced rate of VAT and the Eat Out to Help Out voucher scheme is not yet clear and will need to be considered.

If you have a business in the hospitality sector, and need any assistance with the changes please contact us. You can call us on 01243 782 423 or head to our contact page.