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Temporary VAT changes - Q & A

Covid-19 update 15. VAT changes

UK VAT – reduced rate for hospitality, holiday accommodation and attractions

What’s changing?

To help businesses in the hospitality, holiday accommodation and attractions sector, the reduced rate of VAT (5%) will apply to:

  • Supplies of food and non-alcoholic drinks for consumption on premises from restaurants, pubs, bars, cafes and similar premises in the UK.
  • Supplies of hot takeaway food and hot takeaway non-alcoholic drinks.
  • Supplies of hotel and holiday accommodation and admission to certain attractions in the UK.
Who’s affected by the changes?

These changes affect:

  • Restaurants, pubs, bars, cafes and similar premises across the UK.
  • Suppliers of accommodation and attractions in the UK.
  • VAT registered businesses purchasing from the above suppliers.
When are the changes happening?

The changes are temporary and will apply from 15 July 2020 to 12 January 2021.

My business is in the hospitality, holiday accommodation and attractions sector, does this affect both my sales and purchases?

The changes affect any sales you make of the affected goods and services.

If you have suppliers who are also covered by these changes, your purchases from those suppliers may also be affected.

What if I supply goods or services to the hospitality, holiday accommodation and attractions sector?

If you supply goods or services other than those outlined above then you will not be affected. If you do supply any of the goods or services outlined above then you should ensure the VAT on these sales is amended and correctly accounted for.

What if a supplier issued me an invoice with the wrong VAT amount?

For queries about the VAT rate used on purchase invoices you should contact your supplier. If you don’t get the invoice corrected then you should pay the amount of VAT invoiced. In addition, if you do get an incorrect invoice, you shouldn’t manually override the VAT when entering on the system and should make sure what’s invoiced is what’s reflected on your VAT return.

How do I know which VAT rate applies to a transaction?

The VAT rate to apply to a transaction depends on the tax point, or ‘time of supply’. If the tax point is on or after 15 July 2020, the new rate applies and if the tax point is before 15 July then the existing rate applies.

You can find details of how to determine the tax point of a transaction on Gov.UK

What if I have a sales invoice that includes sales for before and after 15 July?

The VAT rate to apply to a transaction depends on the tax point, or ‘time of supply’. If the tax point is on or after 15 July 2020, the new rate applies  and if the tax point is before 15 July then the existing rate applies.

You can find details of how to determine the tax point of a transaction on Gov.UK

What if I issue a sales invoice after 15 July for goods or services supplied before then?

The VAT rate to apply to a transaction depends on the tax point, or ‘time of supply’. If the tax point is on or after 15 July 2020, the new rate applies  and if the tax point is before 15 July then the existing rate applies.

You can find details of how to determine the tax point of a transaction on Gov.UK

What if I receive a payment or issue an invoice before 15 July for goods or services supplied on or after then?

When the amount of VAT to be charged on the supply goes down, under special provisions you can charge tax at the new rate on goods supplied or services performed after the date of the change, even though payment has been received or a VAT invoice issued before that date. If you use the special provisions, to correct the original invoice, you should issue a VAT only credit note to reduce the amount owed. Find more about this topic in sections 30.7.4 to 30.9.2 of  HMRC’s VAT guide (VAT Notice 700).