1 mins | March 4, 2021

UK further extends VAT rate cut for hospitality and tourism

The temporary VAT reduction was initially extended until 31 March 2021. However, government had indicated that hospitality VAT relief would not be extended again. Nonetheless, industry groups had lobbied for an extension of the relief.

UK further extends VAT rate cut for hospitality and tourism

The temporary VAT reduction was initially extended until 31 March 2021. However, government had indicated that hospitality VAT relief would not be extended again. Nonetheless, industry groups had lobbied for an extension of the relief.

Government has now announced that the temporary reduced rate will be extended for a further six month period, until 30 September 2021.

The VAT rate was reduced from 20% to 5%. The reduced rate is intended to provide urgent relief to hospitality and tourism businesses affected by the COVID crisis.

 

A welcome boost for a struggling sector

In his 2021 budget speech, Chancellor Rishi Sunak confirmed that the 5% rate will be further extended. He further added that the rate would not immediately rise to the full 20% standard rate. Instead, there would be a six month intermediate rate of 12.5% until 31 March 2022.

Sunak noted that hospitality and tourism has been one of the sectors hit hardest by the crisis. The move, he said, would assist “150 000 businesses that employ over 2.4 million people”.

The Chancellor also announced that alcohol duties would be frozen for the second year in a row. The move aims to give pubs and restaurants a boost.

 

What does the hospitality and tourism VAT cut cover?

The reduced VAT rate cut includes:

  • The supply of hot and cold food and drink to be consumed on the premises and supplies of hot takeaway food and drink to  be consumed off site.
  • Hotel and holidays accommodation, as well as fees for caravan parks and tent sites.
  • Admission to applicable events.

The rate cut aims to provide economic stimulus to the sector. The rate cut should also benefit consumers. Customers can expect to continue to pay less at restaurants and for takeaway meals. Customers can also expect ongoing reductions on holiday accommodation and visits to holiday attractions.



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