A new reduced rate of VAT for the hospitality and tourism sector is now in force, it has been confirmed.
The temporary rate – launched in response to the coronavirus pandemic – increased from five to 12.5 per cent on 01 October 2021.
The scheme was introduced in July last year at the height of the global pandemic to support tourism businesses forced to close or cut services, such as restaurants, bars, hotels, and holiday attractions.
The five per cent rate was initially planned to end on 12 January 2021, but was extended until 31 March 2021 and then again until 30 September 2021.
It means the reduced rate of 12.5 per cent has now come into force. It will remain until 31 March 2022 before reverting to the standard rate of 20 per cent.
The VAT cut applies to certain goods and services supplied by the tourism and hospitality sector. This includes supplies of hot and cold food and drink to be consumed on the premises and supplies of hot takeaway food and drink to be consumed off the premises, the provision of hotel and holiday accommodation, pitch fees for caravan parks and tents and related facilities, and admission to attractions not covered by the cultural exemption – such as museums, galleries, art exhibitions, zoos, and theatres.
Trade body UK Hospitality said the VAT cut has helped the sector survive throughout the coronavirus pandemic, but it should be extended beyond 2022.
“A reduction in VAT has helped many of our businesses survive to this point and was most welcome. However, the return of VAT to its pre-pandemic level next year would curtail investment, restrict growth, set back our tourism recovery and risk yet more painful job losses,” it said.
“We’re now calling on the Chancellor to commit to introducing a permanent 12.5 per cent rate of VAT in his upcoming Budget, later this month. This will help protect jobs and continue the support for our hospitality and tourism businesses which contribute hugely to the nation’s economic and social wellbeing.”
For help and advice with related matters, please get in touch with our tourism finance team today.
