Supplies made by the hospitality industry that have been subject to a 5% VAT rate since July 2020 and will become liable to 12.5% VAT between 1 October 2021 and 31 March 2022.

In the 2021 Budget the Chancellor extended the temporarily reduced rate of 5% to supplies made by VAT registered businesses in hospitality, accommodation or admission to certain attractions to 30 September 2021. He confirmed that a new rate of 12.5% would apply between 1 October 2021 and 31 March 2022. The rate returns to the standard rate, currently 20% as of 1 April 2022.

If your business uses the Flat Rate Scheme, FRS, to simplify your VAT calculations the FRS rates will increase as follows from 1 October 2021:

  • Catering services including restaurants and takeaways: 4.5% will increase to 8.5%
  • Hotel or accommodation: 0% will increase to 5.5%
  • Pubs: 1% will increase to 4%

If your business does not complete calendar quarter VAT returns, there will be two FRS rates for VAT returns ending at the end of October or November.

Kay Brookes, partner at Bates Weston comments:

“For most, accounting software allows for easy adjustment of VAT rates, but if you need assistance in understanding your VAT position or the steps you must take, please do get in touch.