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How will hospitality businesses be affected by the VAT rate change?

The last two years have been a rollercoaster for many businesses, and possibly none more so than those in the hospitality sector. In July 2020, the Government announced the temporary reduced rate of VAT for the hospitality industry to encourage customer demand. Now, as Covid restrictions have been lifted, so comes to an end the temporary reduced rate.

From 1 April 2022, those businesses that benefited from this reduced rate (5% between 15 July 2020 and 30 September 2021 and 12.5% between 1 October 2021 to 31 March 2022) will now have to resume applying the standard VAT rate of 20%.

Although it would be a huge help to the industry to retain the current rate of 12.5%, it seems unlikely to happen.

For those businesses affected by the VAT rate change, they need to consider:

  • Does accounting software need to be updated?
  • Do tills need to be updated for new prices?
  • How will deposits taken before the rate change be treated when the supply is made after the rate change?

If you would like any help with dealing with the VAT rate change, please don’t hesitate to get in touch.