Carol Hallam – VAT Specialist
Update following the Government’s Winter Economy Plan on 24 September 2020:
The temporary reduced VAT rate for hospitality, holiday accommodation and attractions has been extended. A 5% VAT rate will apply up to 31 March 2021, originally it was due to end on 12 January 2021.
The temporary measure allows a reduced rate of VAT to apply to businesses across the UK making certain supplies relating to:
- Hospitality
- Holiday accommodation
- Attractions with an admission charge
A VAT rate of 5% will apply to qualifying supplies made between 15 July 2020 and 31 March 2021 instead of a VAT rate of 20%. The rate reduction is automatic for qualifying supplies and it is not necessary to apply to benefit from the reduced rate.
It has been introduced as part of the government COVID package to help rebuild businesses affected by the lockdown closures and social distancing measures.
Which supplies can benefit from the measure?
HOSPITALITY
Supplies qualifying for the temporary 5% VAT rate:
- Hot and cold food and non-alcoholic beverages, including from vending machines, for consumption on the premises from which the supply has been made. This can be its own premises, shared premises, designated dining area or formal outdoor seating area
- Hot takeaway food and non-alcoholic drinks for consumption off the premises from which the supply has been made
Supplies not qualifying for the temporary 5% VAT rate:
- Cold takeaway food and non-alcoholic drinks, including from vending machines, for consumption off the premises from which the supply has been made
- Alcoholic beverages whether consumed on or off the premises from which the supply has been made
- Food and drink supplied as part of catering services off the premises
For further details, please refer to HMRC guidance https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091
Hotel and holiday accommodation
Supplies qualifying for the temporary 5% VAT rate:
- Sleeping accommodation; including bathrooms, living rooms and suites; in a hotel, inn, boarding house or similar establishment
- Rooms provided with sleeping accommodation
- Holiday accommodation, advertised and held out as suitable for holiday use, such as house, flat, chalet, houseboat, tent, caravan etc. Caravan includes mobile homes, park homes and touring/static caravans
- Provision of a pitch, together with associated facilities, for a tent or caravan. Accommodation falling under caravan as detailed above
- Function room used for catering whether the catering is supplied by the business or by a third party
For more details, please refer to HMRC guidance https://www.gov.uk/guidance/hotels-holiday-accommodation-and-vat-notice-7093
admissions to certain attractions
Supplies qualifying for the temporary 5% VAT rate:
- Shows
- Theatres
- Circuses
- Fairs
- Amusement parks
- Concerts
- Museums
- Zoos
- Cinemas
- Exhibitions
- Similar cultural events and facilities
- Goods incidental to the admission to the attraction. For example admission to a tour of a brewery or distillery includes an incidental supply of food and drink or brochure as part of the tour. The whole cost is subject to the temporary reduced rate.
Supplies not qualifying for the temporary 5% VAT rate:
- Supplies which are exempt from VAT i.e. the standard rate of VAT of 20% is not usually applied on the admission charge
- Sporting events
- Goods which are not incidental to the admission to the attraction
For extra details, please refer to HMRC guidance https://www.gov.uk/guidance/vat-on-admission-charges-to-attractions
Other consideration points
- For businesses under the Flat Rate Scheme, the flat rate for catering (including restaurants and takeaways), accommodation and pubs has also been temporarily reduced.
- Businesses using the Tour Operators Margin Scheme will also be affected where the temporary reduced rate applies to supplies of catering, hotel accommodation, shows and similar attractions.
- For supplies straddling the temporary reduced rate i.e. payments or invoices before the 15 July and the supply takes place on or after that date, it would be necessary to look at the deemed time of supply to confirm the VAT rate applicable.