Making the most of the temporary VAT reduction

How the Government is supporting hospitality, accommodation and other businesses affected by enforced closures.

Note: If you have questions about how the VAT reduction affects your business, we advise speaking to an accountant.

What does the VAT reduction mean? +

In July 2020, the Government reduced VAT on certain supplies relating to hospitality, hotel and holiday accommodation and admissions to certain attractions.

This temporary reduction cut the standard rate of VAT from 20% to 5% and remains in effect until 30 September 2021. At this point, the Government will introduce a new reduced rate of 12.5%, which will end on 31 March 2022.

The reduction is to support businesses whose finances have been severely hit by the enforced closures due to the COVID-19 pandemic and the need to comply with social distancing requirements when reopening.

Does the reduced VAT rate apply to my business? +

The Government has cut VAT for businesses that:

  • supply hospitality
  • supply hotel or holiday accommodation
  • charge a fee for admission to certain attractions

If your business does one of these activities, it means you only need to charge 5% VAT on those particular supplies, from 15 July 2020 until 30 September 2021. This is down from the standard VAT rate of 20%.

VAT reduction for hospitality businesses

Hospitality businesses are those that supply:

  • food and non-alcoholic beverages for people to eat and drink on the premises – for example:
    • restaurants
    • cafés
    • pubs
  • hot takeaway food
  • hot takeaway non-alcoholic drinks

Read the government guidance on VAT for hospitality businesses

VAT reduction for hotel and holiday accommodation

“Hotel and holiday accommodation” covers businesses that:

  • supply sleeping accommodation in a hotel, pub, boarding house or similar
  • supply certain holiday accommodation, such as a:
    • holiday house or flat
    • caravan
    • chalet
    • houseboat
  • charge fees for caravan pitches and related facilities
  • charge fees for tent pitches or camping facilities

Read the government guidance on VAT for hotel and holiday accommodation

VAT reduction for businesses charging fees for attractions

Businesses that charge a fee for admission to certain attractions (see below) whose supply currently carries the standard VAT rate of 20% can now charge the reduced rate of 5%, until 30 September 2021.

Eligible attractions include:

  • theatres
  • circuses
  • amusement parks
  • concerts
  • museums
  • zoos
  • cinemas

Sporting events are not eligible, and the temporary reduced rate applies only to admission fees.

Read the government guidance on VAT for businesses charging fees for attractions

Does the temporary VAT reduction affect the VAT Flat Rate Scheme? +

Yes.

It might be that you use the VAT Flat Rate Scheme to make calculating your VAT payments more straightforward. The temporary reduction to the VAT rate means that some of the fixed rates of the VAT Flat Rate Scheme have also been reduced.

Learn more about the VAT Flat Rate Scheme and current rates

Regional support

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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.