NOTE: As announced at budget 2021, the government has:
The supplies to which the temporary reduced rates will apply remain the same.
We review the Chancellor's Summer Economic Update's impact on Food and Drink and Leisure and Tourism.
The Chancellor announced a reduction on the rate of VAT to 5% from 15 July 2020 to 12 January 2021 (extended to 31 March 2021 in the Winter Economy Plan and then to 30 September 2021 in the 2021 Spring Budget) for the following supplies:
More detail is to follow from the government, but key issues for businesses which provide hospitality will be:
The change in rate may affect cash flow where firms are paying 20% VAT on purchases before 15 July, but only collecting 5% VAT for sales after that date. Businesses need to review their cash flow and the timing of purchases.
On 9 July HMRC published detailed guidance on the application of the new reduced VAT rate for hospitality, holiday accommodation and attractions.
Key points are as follows
If you would like to discuss this, please contact a member of our VAT team or your usual Bishop Fleming advisor in the first instance.
See also our article on Eat Out to Help Out in August.
Check out our Business after COVID-19: Transition Knowledge Hub for more guidance and advice on managing the pandemic.