Advice and Guidance direct
The government made an announcement on 8 July 2020 allowing VAT registered businesses to apply a temporary 5% reduced rate of VAT to certain supplies relating to:
The temporarily reduced rate will apply to supplies that are made between 15 July 2020 and 31 March 2021.
These changes are being brought in as an urgent response to the coronavirus (COVID-19) pandemic to support businesses severely affected by forced closures and social distancing measures.
If you supply food and non-alcoholic beverages for consumption on your premises, for example, a restaurant, café or pub, you’re currently required to charge VAT at the standard rate of 20%. However, when you make these supplies between 15 July 2020 and 31 March 2021 you will only need to charge 5%.
You will also be able to charge the reduced rate of VAT on your supplies of hot takeaway food and hot takeaway non-alcoholic drinks.
More information about how these changes apply to your business can be found in Catering, takeaway food (VAT Notice 709/1).
Hotel and holiday accommodation
You will also benefit from the temporary reduced rate if you:
More information about how these changes apply to your business can be found in Hotels and holiday accommodation (VAT Notice 709/3).
Admission to certain attractions
If you charge a fee for admission to certain attractions where the supplies are currently standard rated, you will only need to charge the reduced rate of VAT between 15 July 2020 and 31 March 2021.
However, if the fee you charge for admission is currently exempt that will take precedence and your supplies will not qualify for the reduced rate.
More information about how these changes apply to your business can be found in VAT: Admission charges to attractions.
The Flat Rate Scheme
If you are a small business and use the use the Flat Rate Scheme to simplify your VAT calculations you should be aware that certain percentages have been reduced in line with the introduction of the temporary reduced rate of VAT.
More information can be found in VAT Flat Rate Scheme.
The Tour Operators Margin Scheme
If you are a business that buys in and resells travel, accommodation and certain other services, and you act in your own name, you may operate the Tour Operators Margin Scheme to simplify your calculations.
Further information about how the introduction of the temporary reduced rate of VAT will affect your calculations can be found in Tour Operators Margin Scheme (VAT Notice 709/5).
Accounting for supplies that straddle the temporary reduced rate
In most cases, you will simply account for VAT at 5% for supplies made between 15 July 2020 and 31 March 2021. However, there may be situations where you receive payments or issue invoices before 15 July 2020 for supplies that take place on or after 15 July 2020.
More information about this can be found in sections 30.7.4 to 30.9.2 of VAT guide (VAT Notice 700).
Catering businesses using retail schemes may have to alter their accounting systems for the period 15 July 2020 to 31 March 2021.
If you have a bespoke retail scheme agreement, you should review it and if you think an alteration is needed, contact your large business Customer Compliance Manager, or if you are not a large business customer you should contact Kamran.Hussain@hmrc.gov.uk.
Catering businesses operating the catering adaption
If you have a turnover of between £1 million and £130 million and using a catering adaption method previously agreed with HMRC you may alter the scheme without prior agreement for the period providing the calculation gives a fair and reasonable result. You must then revert back to your previous scheme.
You should keep the records of how you altered the scheme as part of your business records.
To find out more about catering adaption, read section 7 of in Notice 727.
Caterers using the direct calculation scheme
If all your sales are at the reduced rate then the reduced rate will apply to your daily gross takings during the period.
If you have mixed supplies and your till is not programmed to account for different rates then you may adopt the principles of the direct calculation scheme, if appropriate, to the standard rated goods. Otherwise you should make a fair and reasonable apportionment and retain your workings as part of your business records.
Check which attractions are eligible for the temporary reduced rate of VAT from 15 July 2020.
A new temporary reduced rate of VAT of 5% was announced on 8 July 2020 for admission to certain attractions. This temporary rate will apply from 15 July 2020 to 31 March 2021.
Who this applies to
This applies to businesses that make supplies of admissions that are currently taxable at the standard rate. This includes:
Examples of where the reduced rate may apply could be attractions such as:
It does not include any supplies that are exempt under Items 1 or 2 of Group 13 of Schedule 9 to VAT Act 1994.
The temporary reduced rate does not apply to admission to sporting events.
This temporary reduced rate only applies to admission fees.
However, where goods are part of the admission fee and are incidental to the main supply, the whole supply is eligible for the temporary reduced rate.
Further information can be found in paragraph 8.1 of VAT guide: VAT Notice 700.
Supplies which include other incidental supplies
If the main supply is the admission fee to one of the attractions listed above and any other supplies included are incidental, the whole supply will be eligible for the temporary reduced rate. It is the responsibility of each taxpayer to demonstrate that its supplies are eligible for the temporary reduced rate.
Example 1 :
The supply of admission to a tour of a brewery or distillery includes an incidental supply of food and drink as part of the tour. This will be a single supply and will benefit from the temporary reduced rate. However, if the provision of food and drink is the main purpose of the supply, it would not qualify.
The supply of admission to an event such as an exhibition that includes an incidental supply of a brochure or activity book, would be a single reduced rated supply.
Live online performances
If an admission fee is charged to view an online live performance (not a pre-recorded event), this may be eligible for the temporary reduced rate of VAT. This depends on the circumstances in each case and is subject to the fee not already being covered by the Cultural VAT exemption.
When considering the correct VAT liability, you should also check the HMRC Public Notice 741A ‘Place of Supply of Services’, which also includes links to relevant guidance on digital services.