Food, Accommodation and Attraction VAT Rate Cut to 5% from 15 July 2020

On 8 July 2020 The Chancellor announced a Mini-Budget to support people and businesses as we rebuild from the Coronavirus Pandemic. In this blog I will focus on the Food, Accommodation and Attraction VAT rate cut to 5% which is active from Wednesday 15 July.

Check out our more recent blog on the VAT increase to 12.5% from 1 October 2021.

Check out our Eat Out to Help Out” Scheme blog too.

Temporary VAT Rate Changes for Food, Accommodation and Attraction Businesses

From Wednesday 15 July the VAT rate will change from 20% to 5% for the food, accommodation and attraction businesses.

But as with all changes, it’s not that straight forward, as the VAT rate reduction doesn’t apply to everything you’re selling.

So let’s look at it in more detail:

When does it apply?

The temporary VAT rate cut from 20% to 5% applies to the period 15 July 2020 to 30 September 2021.

(previously only to 31 March 2021)

Who does the temporary VAT rate cut apply to?

1. hospitality

  • restaurants
  • cafes
  • pubs
  • more guidance from HMRC here

2. hotel and holiday accommodation

  • hotels
  • bed and breakfast
  • boarding houses
  • holiday accommodation
  • caravan and camp sites
  • more guidance from HMRC here

3. admissions to certain attractions

the reduced VAT rate only applies to entry to attractions such as:

  • a planetarium
  • botanical gardens
  • studio tours
  • factory tours
  • not sporting events
  • more guidance from HMRC here

What does the temporary VAT rate cut apply to?

1. hospitality

  • eat in:
    • hot and cold food
    • hot and cold non-alcoholic drinks**
  •  take-away:
    • hot food*
    • non-alcoholic drinks**

*cold food and cold drinks are zero-rated when eaten off the premises, see our earlier blog on VAT on Takeaway Food.

**alcohol remains at 20% for eat-in or take-out

2. hotel and holiday accommodation

  • sleeping accommodation, including bathrooms, living rooms
  • rooms with sleeping accommodation
  • rooms provided for catering
  • long stays up to 28 days (over 28 days a reduced rate is used – see guidance)

3. admissions to certain attractions

  • entry to attractions that are currently 20%
  • incidental food and drink can be included in the 5% calculation
  • live online performances (if not covered by cultural events exemption)
  • not sporting events

What’s the best way to record the VAT rate cut of 5%?

  • We’d always advise automating this as much as possible
  • So that the reduced VAT is calculated at the point of sale
  • We recommend automated systems such as EPOS (see our blog What is an EPOS)
  • You should be able to update your products in your EPOS with the correct VAT rates
  • Here’s Xero’s handy guide on changing the VAT rate in your Xero account
  • Here’s our iZettle vs Square blog, which tells you about our favourite EPOS solutions.

What about the “Eat Out to Help Out” Scheme

This will apply from 3 August to 31 August 2020, so you’ll need to get your head round both new updates.

We’re here to help though.

Check out our blog on the Eat Out to Help Out Scheme, to find out how it works, and how you can claim

What’s next?

  • The most important thing to do is get ready
  • Get your menus updated
  • Get your EPOS updated
  • Get any other systems updated, like your online sales channels, and Xero.
  • Get in touch with us for help and support!
  • Check out our other Hospitality blogs

We’re here for you

Check out our new COVID19 Resource page for loads of info.
Join our private Facebook page for Small Business Owners.
Book in a 30 minute zoom call with me.

Stay safe. Stay strong.

Sharon x