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Temporary VAT reduction for hospitality sector

Presenting his Summer Statement on 8 July 2020, the Chancellor introduced a temporary reduction to the standard rate of Value Added Tax (VAT) from 20% to 5%, which is aimed at those sectors that have been hardest hit by Covid-19 (hospitality, holiday accommodation and attractions).

Impact of Reduced VAT or not?

These changes are in place for an initial 6 months and will end on 12 January 2021.

It is hoped that this will create a significant benefit for much of the hospitality and tourism sector. Although, it is important to note the temporary reduced rate does not apply to alcoholic drinks and will therefore not significantly benefit pubs that do little or no food.

The extent to which the VAT reduction will be passed on to consumers is yet to be seen. It will be harder in some situations where significant costs will be required to do so. For example, many of the impacted businesses have already changed their menus prior to being able to reopen following the Covid-19 lockdown restrictions. As such, they are unlikely to be keen to incur the additional costs of having these reprinted.

It remains to be seen if these changes will have the desired effect of stimulating spending in some of the hardest hit sectors.

Here to help

We are expereinced advisors to businesses within the hospitality sector. If you have any questions regarding the temporary VAT reduction or would like further guidance to meet your needs, talk to our experts to see how we can help you. 

Are you unclear on any COVID-19 related issues that your business is facing? Get in touch and we will be happy to assist you

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About the author

Terry Bridle

Terry qualified as a member of the AAT (Association of Accounting Technicians) in 2001, and was granted Fellow Membership in 2008 whilst with Ocean Consultancy.
Ocean Consultancy became part of Haines Watts in 2013 and Terry became head of accountancy services where he spends his time working between the Exeter and Crediton offices.

His main responsibilities are overseeing all activities of the accountancy department for small to medium owner-managed businesses, involving supervision and management of general accounting and maintenance of effective internal controls, ensuring statutory compliance in all accounting initiatives.

Terry is a keen football supporter and also enjoys rugby, and, time and family permitting, follows the Exeter Chiefs whenever possible.

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