VAT on certain supplies of hospitality was reduced to 5% last year during the pandemic and this was then further extended until 30 September 2021.
This is a reminder that from 1 October 2021, the VAT rate will be increased to 12.5% on the same supplies, including hotel and holiday accommodation, admission to certain attractions as well as food and non-alcoholic drinks for on-premises consumption.
Most of the above supplies are priced as VAT inclusive and if you are uncertain how to calculate the VAT value in an inclusive price, the VAT fraction is 1/9.
If you offer long-term accommodation, the reduced value rule will still apply but the % will change from day 29. The reduced VAT value amount will change from 2.6% of the gross weekly cost to 5.62%.
You will also need to remember to adjust the relevant tax codes on any accounting software and there is still time to ensure your accounting software can cope with this ‘one off’ VAT rate.
The VAT rate of 12.5% will run from 1 October 2021 until 31 March 2022 when it is expected to revert to 20%.
If you require any further advice on the above, contact our VAT team today.