The 5% rate of VAT applies from 15 July 2020 to 12 January 2021, in the hospitality and tourist sectors. This reduced VAT rate broadly covers; restaurant meals or take-aways, hotel and similar accommodation, and entrance to tourist attractions.
Many businesses that serve food also sell items which are still subject to the standard rate of VAT, such as alcoholic drinks, snacks, and takeaway sandwiches which are zero rated. Their tills may have difficulty in coping with two or three rates of VAT on one order, so you need to help such clients calculate the correct amount of VAT to pay over to HMRC.
The VAT treatment of “meal deals” can also be complicated, as there are potentially three different ways of recording the VAT due, see VAT Notice 700/22, para 4.3.2 example 3. Where the meal deal includes hot food such as a pizza the reduced rate will also apply. Make sure your clients are correctly recording the VAT on such meal deals.
The 5% rate only applies to food eaten on the premises or hot takeaways, so catering contracts, where the food is eaten at another venue, are standard rated (see VAT Notice 709/1). If the caterer uses the flat rate scheme for small businesses, she can benefit from the lower flat rate percentage of 4.5%.
The reduced VAT rate on admission fees for attractions doesn’t cover admission charges for sporting events. HMRC has now clarified that the 5%VAT rate doesn’t apply to admission to sporting facilities and well as sporting events. Thus, bookings to use a tennis court or five-a-side football pitch are still subject to 20% VAT.