Reduced VAT Rate

The guidance of the reduced VAT rates has been published

Sharing an update on the guidance Elman Wall produced the following summary:

  • The changes will apply to tourist accommodation, catered food and non-alcoholic drinks (including hot takeaway food/drink) and admission to attractions. The scope is fairly wide, although crucially does not apply to admission to sporting events or cold takeaway food/drinks.
  • Services sold within TOMS do not qualify at the moment. It may be that HMRC comment further on this point at a later date, but based on current guidance it is clear that the standard rate still applies to the EU margin. Some operators may be able to obtain the relief using the transport company scheme, although this will only be possible if various admin points (contracts, invoices, etc) are satisfied.
  • UK in-house services provided within a TOMS package will qualify for the reduced rate provided they fit the criteria of qualifying services.
  • The “tax point” will be crucial for many (i.e. when are services “supplied” within the 6 month reduced rate period). It doesn’t help that the changes are introduced halfway through a month, and at short notice, but it is really important to ensure that you understand the tax point rules for VAT to ensure that the rate reduction is applied effectively. This will also be key in terms of planning towards the end of the period (i.e. forward bookings may also qualify).
  • Whether or not the supplier or customer benefits from the cut will depend firstly on the legal and contractual terms. Where contractually the supplier is permitted to keep the benefit, it may also then be a commercial decision.

Read the full guidance here

Separate, more detailed guidance is provided for individual business types:

Catering & Takeaway Food

Hotels & Holiday Accommodation


Correct as of 13 July 2020