Hospitality & Tourism businesses VAT Rate Increase

VAT rate increase from 1 October 2021

30 September 2021 is fast approaching. 

If your hospitality or leisure business is subject to the temporary reduced rate of VAT brought in to help businesses through the COVID pandemic, please remember that the current VAT rate ends on 30 September 2021.

Whether you are on the Flat Rate Scheme or Standard VAT accounting you must ensure that your accounting systems are all set to deal with the VAT rate increase on 1 October 2021.

The new interim VAT rate of 12.5% applies from 1 October 2021 to 31 March 2022. If you are on the Flat Rate Scheme the new interim rates are:

• Catering – 8.5%
• Hotels – 5.5%
• Pubs – 4%

There are also a few technical areas that may catch you out or indeed could work in your favour if you are aware of them, for example:

• Have you utilised the transitional provisions under the VAT legislation, to allow some deposits taken prior to the reduced rate of VAT being introduced, to be restated and accounted for at the lower rate of VAT?
• Are you collecting higher value deposits? The lack of anti-forestalling legislation when the VAT rates increase (on 1 October 2021 and again on 31 March 2022) means that sales invoices raised or payments received by hospitality and tourism suppliers before the date of rate increase, can be accounted for at the VAT rate in force at the date of the invoice or payment rather than when the goods are consumed.

As always, Dodd & Co are here to help! Please do get in touch if you would like us to review your accounting systems to ensure that your business has gained full benefit from the VAT rate reduction, or if you require assistance applying the new interim VAT rates.

A link to the HMRC guidance can be found here:  https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions