As part of the Chancellor’s Statement on 24th September 2020, he announced two VAT measures.
Extension of the temporary reduced rate for supplies of hospitality, holiday accommodation and admission to attractions
It is universally accepted that the hospitality and tourism sectors have been severely impacted by the COVID-19 restrictions. In the summer the Chancellor announced the introduction of a temporary reduced rate of 5% for those sectors to encourage us all to venture out once more. The reduction took effect from 15 July 2020 and was due to end on 12 January 2021.
With both infection rates and public levels of anxiety on the rise and with dire warnings of mass unemployment within the sector, the Chancellor has now extended the temporary reduced rate to 31 March 2021. The stated aim of the extension is to support more than 150,000 businesses and help protect 2.4 million jobs through the winter.
The reduced rate applies to the following supplies:
- all 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
- admissions to many attractions such as cinema, theatres, zoos and concerts that are not already eligible for the cultural VAT exemption.
Extended terms for payment of deferred VAT
At the beginning of the crisis, the Chancellor provided taxpayers with the opportunity to defer VAT payments otherwise due between 20 March 2020 and 30 June 2020 to 31 March 2021.
The Chancellor is now giving businesses the option to pay any deferred VAT in 11 instalments over the 2021-22 financial year on an interest free basis. Taxpayers will need to opt into the New Payment Scheme, which will be open to all businesses that took advantage of the deferral opportunity.