On 8th July 2020, Rishi Sunak used his Summer Statement to share a raft of economy stimulating measures as the country weathers the Coronavirus pandemic (more on that here.)
One of those initiatives is a temporary reduction in the VAT rate for hospitality, holiday accommodation and attractions.
When does the reduction apply?
The reduction is valid from 15th July 2020 until 31st March 2021.
What is the reduction?
During this period, the rate of VAT on certain supplies in the hospitality industry, along with hotel and holiday accommodation and admissions to some attractions, will be reduced to 5%.
Why did the Chancellor introduce this reduction?
The change is being introduced to support businesses severely affected by closures and social distancing.
The hospitality and tourism sectors are two of the hardest hit by the pandemic. Mr Sunak said, “Our economy relies on consumption – especially social consumption.” The reduction, therefore, aims to stimulate consumer spending in these sectors and boost the economy.
What are the affected supplies?
HMRC has published a list of supplies that will benefit from the temporary reduction:
- Food and non-alcoholic beverages sold for on-premises consumption
- Hot takeaway food and hot takeaway non-alcoholic beverages
- Sleeping accommodation in hotels and similar establishments, holiday accommodation, pitch fees for tents and caravans, and the associated facilities
- Admissions to:
- Amusement parks
- Similar cultural events and facilities
In the case of admissions, if the existing cultural exemptions cover the event or venue, the exemption will take precedence.
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