Chancellor Rishi Sunak has announced that the cut in VAT rates for the hospitality sector, which came into force back in July, will be extended until 31 March 2021. It was previously going to end on the 13 January 2021.
The cut applies to vat registered organisations that make supplies of hospitality, hotel and holiday accommodation and admission to certain attractions, and their advisers.
The rate was originally cut on 8 July 2020, when the government announced that it would introduce a temporary 5% reduced rate of VAT for certain areas of the hospitality industry. This is from the standard VAT rate of 20%.
The cut is expected to cost the Treasury around £800m, which is in addition to the original estimated figure of £2.5bn – so a grand total of £3.3bn so far. This doesn’t include the “Eat Out to Help Out” scheme for the sector back in August.
Industry commentators said that while it’s good news for the industry, it doesn’t mean that they’re out of the woods yet, especially with the new opening time restrictions on pubs and restaurants.
Affected Supplies
The following list of supplies are affected by the reduced 5% VAT rate:
- Food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs
- Hot takeaway food and hot takeaway non-alcoholic beverages
- Sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities
- Admissions to the following attractions that are not already eligible for the cultural VAT exemption such as:
- Theatres
- Circuses
- Fairs
- Amusement parks
- Concerts
- Museums
- Zoos
- Cinemas
- Exhibitions
- Similar cultural events and facilities
For more information, you can take a look at the Government Guidance.
