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2 months to go: Is your business ready for a new UK VAT rate?

With just two months remaining until the UK introduces a new VAT rate for the hospitality industry, we’re advising tax teams around the world to consider whether they are ready to implement and comply with it.

If your organisation makes supplies within the hospitality sector (including hotel, holiday accommodation and attractions), you need to act now.

In July 2020, the UK government introduced a temporary 5% reduced rate of VAT for these supplies in response to the impact of the Covid-19 pandemic. This rate was extended first until 31st March 2021 and again to 30th September 2021.

But from 1st October 2021, the reduced rate will be replaced by the introduction of a new reduced rate of VAT of 12.5%, which will be in place until 31st March 2022.

Pre-pandemic, hospitality businesses paid and collected VAT at the UK’s standard rate of 20%, so the new 12.5% figure is an entirely new rate for tax teams to determine, calculate and

What will be affected?

A significant number of supplies that are currently benefiting from the 5% reduced rate will continue to be permitted under the new 12.5% reduced rate from 1st October. These include:

  • Food and non-alcoholic drinks consumed on the premises, such as in restaurants, cafes and pubs.
  • Admissions to attractions that are not covered by the cultural VAT exemption, including theatres, fairs and museums.
  • Accommodation in hotels, holiday homes or caravans
  • Hot takeaway food and hot takeaway non-alcoholic drinks

How we can help

Any Innovate Tax clients that believe they may require this update to be made to their GB VAT solution should raise a support ticket. Our team will endeavour to ensure your solution adopts the new rate as soon as possible.

If you are not a current client, get in touch to find out more about how we could help you.