VAT rate reduction for hospitality, accommodation & attractions
The reduced VAT rate of 5% ended on 30 September 2021. In place now is an interim rate of 12.5% which lasts for 6 months, with the standard rate of 20% returning in April 2022. In common with the previous reduced rates of VAT, this new reduced rate also applies to businesses in those sectors that use the flat-rate scheme.
This measure is expected to continue to stimulate the economy by encouraging people to go out for meals or order takeaway, stay in a hotel or holiday let, or visit certain attractions. It is also expected to support the cash flow and viability of businesses as they recover from the Covid-19 pandemic. This is particularly important at a time when furlough has ended, resulting in businesses being more strapped for cash, and facing the possibility of a downturn in customers as they are either made redundant and cannot afford meals out and stays away, or return to work and don’t have the free time to get out and about.
For hospitality businesses, the interim rate applies to hot and cold food served on the premises, and hot takeaway consumed off the premises. It does not apply to cold takeaway food, or alcohol consumed on or off the premises. This should make the thought of a night out a more enticing prospect, even as the weather turns and the nights draw in, with the alternative of date nights at home for those who don’t fancy braving the cold!
For accommodation businesses the interim rate applies to booking fees for hotels, self-catering properties, caravan parks and camping sites. Those of us able to take holidays during term time may therefore be able to make a saving by getting away before March next year!
Some attractions can also benefit from the reduced rate, unless these are exempt under the cultural exemption, which mainly applies to publicly owned or funded attractions. Many attractions are also considerably quieter at the moment due to a lack of foreign tourists, so the lure of better availability and cheaper prices may encourage people to take some day trips over the next 6 months.