Guidance on the VAT Rate Change for the Tourism and Hospitality Sector

You are probably all familiar now with the Chancellor’s announcement on Wednesday regarding a six month reduction of the UK VAT rate on certain hospitality and tourism services to 5%, effective from Wednesday 15 July 2020 until Tuesday 12 January 2021.

The items benefitting are catered food, tourist accommodation and attractions and HMRC has now released further guidance on the VAT rate change. Our head of VAT, Laura Chipp has made a summary of the latest updates:

    • The changes will apply to tourist accommodation, catered food and non-alcoholic drinks (including hot takeaway food/drink) and admission to attractions. The scope is fairly wide, although crucially does not apply to admission to sporting events or cold takeaway food/drinks.
    • Services sold within TOMS do not qualify at the moment. It may be that HMRC comment further on this point at a later date, but based on current guidance it is clear that the standard rate still applies to the EU margin. Some operators may be able to obtain the relief using the transport company scheme, although this will only be possible if various admin points (contracts, invoices, etc) are satisfied.
    • UK in-house services provided within a TOMS package will qualify for the reduced rate provided they fit the criteria of qualifying services.
    • The “tax point” will be crucial for many (i.e. when are services “supplied” within the 6 month reduced rate period). It doesn’t help that the changes are introduced halfway through a month, and at short notice, but it is really important to ensure that you understand the tax point rules for VAT to ensure that the rate reduction is applied effectively. This will also be key in terms of planning towards the end of the period (i.e. forward bookings may also qualify).
    • Whether or not the supplier or customer benefits from the cut will depend firstly on the legal and contractual terms. Where contractually the supplier is permitted to keep the benefit, it may also then be a commercial decision.

Please let us know if you have any questions or would like to discuss.

You can always contact Laura directly by email on laura.chipp@elmanwall.co.uk

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