COVID-19: temporary VAT reduction for hospitality, holiday accommodation and attractions

9 July, 2020

Last updated 4 March 2021

On 8 July 2020 the Chancellor announced that certain supplies of hospitality, holiday accommodation and admission to attractions would be subject to a temporary 5% reduced rate of VAT.

This reduction in the VAT rate was initially intended to take effect for supplies made between 15 July 2020 and 12 January 2021, but was later extended to 31 March 2021.

At the Budget on 3 March 2021 a further extension was announced:

  • The 5% reduced rate will now apply until 30 September 2021.
  • A new 12.5% reduced rate will then apply from 1 October 2021 to 31 March 2022.

The scope of the reduced rate will not change during this period, with the following supplies qualifying for the 5% / 12.5% reduced rate:

  • food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs;
  • hot takeaway food and hot takeaway non-alcoholic beverages;
  • sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities; and
  • admission to attractions that are not eligible for the cultural VAT exemption, including theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities.

For those business that use the flat rate scheme (FRS), certain percentages have been reduced in line with this temporary VAT rate reduction.

More information on what to do when a supply straddles the introduction of the temporarily reduced rate on 15 July 2020 can be found in sections 30.7.4 to 30.9.2 of VAT Notice 700.

The ATT have raised a number of queries with HMRC regarding the scope and operation of this temporary reduced rate. You can find a copy of the questions and HMRC's responses here.

HMRC has also published a range of further guidance notes on this temporary reduction, including: