The VAT rate for the hospitality sector will remain at 5% until 31 March 2021, and from that date, traders can apply for an 11 month interest-free payment window for their deferred VAT.
The reduced 5% VAT rate for the hospitality industry was due to apply for the period between 15 July 2020 and 12 January 2021. This period has now been extended to 31 March 2021.
This is good news for the hospitality industry, especially as the winter months will have the dual challenge of both Covid-19 restrictions and higher overheads for many businesses (electricity and gas etc) coupled with lower sales.
Just to recap, the 5% rate applies to the following main supplies:
- Food and drink – on the premises supplies of food and drink, hot take away food and hot take away drinks, both excluding alcoholic drinks .
- Holiday accommodation – hotels, caravan sites, guest houses, camp sites.
- Admission fees to tourist attractions – such as zoos, theatres, fairs, amusement parks etc.
HMRC clarifies reduced rate points
The Association of Taxation Technicians (ATT) raised a number of specific questions with HMRC about some of the technical details of the reduced rate, and the HMRC replies have now been published.
Here are a couple of practical issues that have been helpfully clarified by HMRC.
Spirit and mixer’ and ‘pie and pint’ offers
Mixed supplies is always a controversial subject with VAT. The ATT suggested that a ‘gin and tonic’ could be classed as a single supply of a non-alcoholic drink charged at 5% VAT because the tonic has more fluid than a gin. This is a spirited proposal by the ATT but HMRC confirmed that it is a single supply of an alcoholic drink and subject to 20% VAT. The punters are interested in the gin and the tonic is an incidental extra.
However, a ‘pie and pint’ offer ordered inside a café or pub is a mixed supply with output tax apportionment needed, because customers expect both food and drink – ie 20% VAT is payable on the pint and 5% VAT on the pie.
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