The hospitality and tourism sector has been enjoying a reduced rate of VAT (5%) since 12 July 2020. It applies to most supplies made by hotels, tourist attractions, members’ clubs and most places that host events. It also applies the food and drink served in those premises, hot takeaway food and drink, but not alcoholic drinks.
This 5% VAT rate will increase to 12.5% on 1 October 2021, to apply until 31 March 2022. This rate rise provides hoteliers and event organisers with an opportunity to promote advance payment for events, hotel rooms and even meals.
Any advance payments, or non-returned deposits, must carry VAT at the rate applicable when the payment is taken. This is confirmed in section 7 of VAT notice 709/3: Hotels and holiday accommodation.
For example, a members’ club which is hosting a fund-raising dinner in October at £180 per head (including VAT), could offer a £12 discount for those who pay in full for their tickets before 1 October.
Ticket net of VAT: £160, including 12.5% VAT = £180, including 5% VAT = £168
The same principle applies to Christmas events booked in advance. If you are planning to offer party events or hotel rooms over the winter holiday, suggest they get their advertising campaigns up and running now with a discount option for early booking.
Written by the Tax Advice Network