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.

Jayne Tressler - BSG Manager - Hospitality specialist