On 8th July, the Government announced a VAT reduction for hospitality trade from 20% to 5%. This came into force from 15th July 2020 and will run until 12th January 2021.

What are the details in summary?

Food and Drink

There is a distinction between food and drink intended to be eaten on premises and that intended to be taken away.

On Premises

ALL food and non-alcoholic drinks (hot or cold) have been reduced to 5% VAT.

Alcoholic drinks are still rated at 20% VAT.

Takeaway

Hot food and hot non-alcoholic drinks have been reduced to 5% VAT.

Cold food is already rated at 0% VAT.

Cold drinks are still rated at 20% VAT.

Alcoholic drinks are still rated at 20% VAT.

Accommodation and Attractions

Rooms and tickets that have been pre-booked at 20% are still subject to the 5% reduced rate, it is at the discretion of the owner as to whether to issue a credit note and refund for the difference.

So, what does this mean for you?

It is at the owner’s discretion whether they would like to reduce your prices (i.e. only charge 5% VAT on top of your net price) or whether they would like to still charge the same price (i.e. class the income as received with 5% VAT and therefore ‘raise’ their net price).

Flat Rate VAT

If you are in the hospitality trade and on the flat rate VAT scheme the percentage you pay on your gross income has also been reduced to the following until the 12th January 2021.

Catering services including restaurants and takeaways    4.5%

Pubs                                                                                                      1%

Hotel or accommodation                                                              0%

If you would like any further clarification, please do not hesitate to contact us.