VAT changes for Hospitality

In July 2020 the government cut the standard rate of VAT to be used in the hospitality and tourism sectors from 20% to 5%.

The reduced rate applies to most supplies made by hotels, tourist attractions, members’ clubs and many non-sporting events. It also applies to the food and drink served in those premises, hot takeaway food and drink, but not alcoholic drinks. Hospitality businesses are not obliged to change their prices in line with the VAT rate, so can take advantage of the VAT differential.

However, the party is nearly over, as the reduced VAT rate increases to 12.5% on 1 October 2021 and will be restored to the full 20% standard rate on 1 April 2022.

These VAT rate rises provide hoteliers and event organisers with an opportunity to promote advance payment for events, hotel rooms and meals. Any advance payments or nonreturned deposits must carry VAT at the rate applicable when the payment is taken, not when the event is attended, meal consumed or room used.

We can help you work out the discounts you can offer for early booking of hospitality.