Philip Douglas Mar 14, 2022 9:12:00 AM 3 min read

When does the reduced VAT rate for hospitality end?

The current reduced VAT rate for hospitality is due to end on the 31st of March 2022 increasing from the current rate of 12.5% to the standard rate of 20%.

Of course, there is still the possibility that the Government may step in to address this, but we have yet to see any signs that this is going to happen.

When was the rate reduced?

The current reduced rate came into effect from October 1st 2021, following a greater reduction in the VAT rate for the hospitality sector because of COVID-19.

Prior to the reduced rate of 12.5%, VAT had been reduced for the hospitality sector as low as 5% as announced in the Summer Economic Statement on 8th July 2020.

Is the reduced rate likely to be extended?

Honestly, nobody really knows.

With increased costs of living continuing to spiral, & war in Europe potentially disrupting food supplies, anything could happen.

What we do know, is that as of publishing this article there hasn’t been anything specific outlined by Government regarding an extension to the reduced VAT rate for the hospitality sector.

What was covered by the reduced VAT rates?

VAT notice 709/1 was updated, by Government, to reflect legislative changes that temporarily introduce a 5% reduced rate on supplies of:

  • Hot & cold food for consumption on the premises on which they are supplied
  • Hot & cold non-alcoholic beverages for consumption on the premises on which they are supplied
  • Hot takeaway food for consumption off the premises on which they are supplied
  • Hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied.

Please note, however, that there is (was?) an exception within VAT notice 709/1 which states that:

‘any supplies of food & drink that are supplied as part of a supply of catering services for consumption off-premises remain standard rated’.

As always, things are rarely clear cut with changes like these & the exceptions could easily have led to confusion & costs.

What do I need to do?

We would advise anyone who has been affected by the reduced VAT rate for hospitality to speak with their finance team or accountant.

There are a multitude of companies out there that will be able to offer professional advice.

Of course, you can also head over to the Government website & read the resources & notices there.

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Philip Douglas

Philip Douglas is Chief Technical Officer of Compleat Software. As a chartered accountant, Philip has extensive experience in UK, European & North American accounting. As a technical & application leader working with many leading accounting/ERP software vendors his accounting knowledge molds our products of today. Philip is the driving force behind our culture, products & vision & is the reason Compleat is the disruptive leader in the market.
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