Reduced rate of 5% VAT on Leisure and Tourism – UPDATE

Tax

To help boost the economy and encourage consumer spending in the leisure and tourism sector, the UK Chancellor announced a temporary cut in the VAT rate to 5% for certain supplies. The reduction initially applied from 15 July 2020 to 12 January 2021.

The government announced at Budget 2021 that the temporary reduced rate would be extended for a further six-month period at 5% until 30 September 2021.

A new reduced rate of 12.5% will then be introduced which will end on 31 March 2022. The scope of the relief will remain unchanged.

Three categories of supplies are covered:

  • Sales of food and drink
  • Hotels and holiday accommodation
  • Admission to attractions

Food and drink

The circumstances in which the reduced rate will apply to sales that would otherwise be standard-rated are:

  • Food and drink to be eaten on the premises, or
  • Food and drink supplied hot to be taken away.
  • Cold takeaway food is not included because that would generally be zero-rated anyway, unless it was of products that are always standard-rated such as confectionery. Alcoholic drinks are excluded from the reduced rate and will remain standard-rated in all circumstances.

This will therefore apply to restaurants, pubs, cafés and take-aways.


Hotels and holiday accommodation

This includes sleeping accommodation in hotels, inns and bed & breakfast, holiday homes, caravan and campsites.


Attractions

Admission to cultural and leisure attractions, where these are not already covered by the cultural exemption, will include theatres, cinemas, concerts, zoos, amusement/theme parks, fairs, circuses, exhibitions, shows, museums and similar cultural attractions. Sporting events are excluded, and the reduced rate only applies to admission charges and not separate charges once within the venue. HMRC also state that a charge to view a live performance online may also be eligible.


If your business is within one of the three categories mentioned above, and you have not been charging the reduced rate of VAT, please contact us immediately as you may be entitled to a VAT rebate.

Chippendale and Clark have experience in setting up till systems for pubs and restaurants, if your system is outdated and you require assistance, please contact the office on 01249 465 435 to arrange an initial meeting for us to find out more about you and your business.

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