Our dedicated Technology team can support your business locally, nationally, and internationally.
HMRC has now implemented legislation introducing a temporary reduced VAT rate for certain supplies.
15 June 2026
HMRC have now implemented the legislation that will apply to the upcoming temporary reduced rating. As HMRC alluded to, the brief that was initially published “reflects the law as it is expected to apply once enacted”. This means there are no major surprises in the new legislation which alters how the brief should be applied.
As a reminder, the brief can be found here and the enacted legislation can be found here.
We have summarised below the key actions you should now consider to determine how the reduced rate applies to your business:
Review whether you provide eligible supplies (e.g. children’s meals, children’s tickets, or admission to qualifying attractions). The legislation confirms that eligibility will be based on how items are marketed, priced and presented, not simply who consumes them.
Confirm which supplies will remain subject to the standard rate (for example, takeaway meals, adult-only tickets to theatres, sporting activities, or separately priced add-ons)
Where supplies are sold together (e.g. meals with extras or family tickets), consider whether the reduced rate applies to the whole package or only to certain elements under normal VAT principles. HMRC clearly referred questions related to packages to their VAT Manual here, reinforcing the fact that usual VAT principles will continue to apply on eligible supplies made as part of a single supply with ineligible elements.
Decide whether to pass on the VAT saving to customers or retain this as additional margin. Particular care is needed where offering family packages, as these can bring adult elements within the reduced rate. During their webinar, HMRC did say that “In keeping with the family focus of this measure the Government generally expects the VAT saving will be passed on where possible.”
The reduced rate only applies to supplies taking place during the eligible period. Tickets purchased in advance for use after 1 September 2026 remain standard-rated. Summer or seasonal passes may fall outside of the reduced rate, if they allow admission outside of the window.
You may be able to apply the reduced rate to advance payments (including those received before the announcement), subject to the usual VAT change-of-rate rules
Where VAT has already been accounted for at 20% and you choose to apply the reduced rate, adjustments can be made. HMRC have stated in this scenario they would expect any overpaid VAT refunded to customers where appropriate.
Ensure your invoicing, EPOS, and accounting systems correctly apply the temporary 5% rate for qualifying supplies during the relevant period.
As VAT treatment depends on how supplies are presented, ensure that menus, ticket categories, and promotional materials are consistent with the intended VAT treatment.
Keep clear records of how you have determined eligibility and applied the reduced rate in the event of HMRC enquiries
Please let us know if you would like us to review your specific offerings in detail. We can help you identify opportunities to maximise the benefit of the reduced rate, ensure your VAT treatment is robust, and support implementation across pricing, systems, and processes.
We'll send you relevant insight, events and analysis from our technical, sector and service teams - straight to your inbox.
