The government has extended the temporary 5% reduced VAT rate. The temporary rate was originally planned to end on 12th January 2021 however, it has now been extended to 31st March 2021. These changes have been introduced in response to the Covid-19 pandemic to support those businesses affected most.
The extension of the 5% reduced rate will apply to certain businesses operating in:
- Hospitality
- Hotel and holiday accommodation
- Admissions to certain attractions
Hospitality
Typically, restaurants, cafes and pubs who supply food and non-alcoholic drinks on their premises would charge VAT at the standard rate of 20%. However, supplies made between 15th July 2020 to 31st March 2021, will only need to be charged at 5%. The VAT reduced rate can also be charged on supplies of hot takeaway food and hot takeaway non-alcoholic drinks.
Hotel and holiday accommodation
The temporary reduced rate applies to businesses in the hotel and holiday accommodation sector who:
- Supply sleeping accommodation in a hotel
- Charge fees for caravan pitches
- Charge fees for tent pitches or camping facilities
- Supply certain holiday accommodations
Admission to certain attractions
If there is a fee for admission to certain attractions, where supplies are currently standard rated, then the reduced VAT rate will apply from 15th July 2020 to 31st March 2021. However, if no VAT is charged on admissions then VAT will remain non-chargeable.
Flat Rate Scheme
For small businesses using the Flat Rate Scheme to simplify VAT calculations, should be aware that in line with the temporary reduced rate of VAT, certain percentages have been reduced.
Further information on the temporary VAT reduced rate can be found on the government website.
