The 5% rate of VAT has applied to most sales in the hospitality and tourism sectors since 15 July 2020. This reduced rate will now apply until 30 September 2021, after that a rate of 12.5% will apply until 31 March 2022. Also the VAT registration threshold is frozen at £85,000 until 31 March 2024.
This reduced VAT rate broadly covers; restaurant meals or hot take-away meals (not sandwiches), hotel and similar accommodation, and entrance to tourist attractions. It does cover non-alcoholic drinks taken with a restaurant or café meal eaten in house, but where the drink is part of a take-away it must be hot – like coffee. Refer to VAT notice 709/110 to clarify any confusion about VAT on catering food or takeaway meals.
The flat rate scheme percentages for pubs, hotels and catering services will also remain at the lower rates until 30 September 2021, and will be revised to take account of the 12.5% until 31 March 2022.
Remember the reduced VAT rate on admission fees for tourist attractions and cultural venues doesn’t cover tickets for sporting events or admission to sporting facilities. Thus, bookings to use a tennis court or five-a-side football pitch are still subject to 20% VAT.
Written by the Tax Advice Network