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Temporary reduced rate of VAT for hospitality sector withdrawn, Government confirms

The temporary reduced rate of VAT for certain supplies of food, drink, and accommodation has been withdrawn, the Government has confirmed.

The relief – introduced last year in response to the coronavirus pandemic – was replaced by a transitionary rate from 01 October.

Under the initiative, a temporary five per cent rate of VAT was applied to certain supplies – such as goods relating to hospitality, hotel and holiday accommodation, and admissions to attractions – sold between 15 July 2020 and 30 September 2021.

But due to the lifting of social distancing restrictions and the reopening of the economy, the temporary rate has now come to an end.

As planned, a new rate of 12.5 per cent has come into effect from 01 October 2021 until 31 March 2022, when it will revert to the standard 20 per cent rate of VAT.

While providing invaluable support over the past 18 months, the hospitality and hotel industry says the temporary rate should be extended past 2022.

“It would bolster businesses’ ability to navigate the mounting challenges in the labour market and food supply chain, would improve job creation, productivity and investment, and ensure the UK remains competitive in a global tourism market, along with providing consumers with continued affordable prices,” said UK Hospitality’s chief executive, Kate Nicholls.

Commenting on the scheme, a Treasury spokesman said: “The hospitality sector has benefited from extensive support throughout the pandemic through our £400 billion Plan for Jobs, with the furlough scheme, grants, tax cuts and deferrals.

“We’ve always been clear that the lower rate of VAT for tourism and hospitality was a temporary measure to support businesses as they recover from the pandemic.”

Click here to learn more about the VAT cut.

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