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Coronavirus – Reduced VAT on Hospitality Suppllies

The Chancellor announced that VAT in the following sectors would be reduced to 5% from 15 July 2020:

  • Food and drink for pubs cafes and restaurants
  • Overnight accommodation
  • Tourist attractions

The reduced rate is due to end on 31 March 2021.

Further information relating to the food and drink VAT change is set out below.

  • The reduction in VAT does not apply to any sales of alcohol.
  • For sales which are not take away, the VAT rate of 5% will apply to all non-alcohol sales.
  • For takeaway sales, the reduced rate of VAT will only apply to hot food and drink sales.

If we compare a hypothetical order taken by a café from a customer before and after the VAT change where the purchase is for the following:

  • apple
  • bottle of beer
  • can of coke
  • hot coffee
  • cold sandwich
  • hot pie
  • packet of crisps

If the customer ‘eats in’, before the VAT change all of the items would be charged at 20% VAT. After the reduction in VAT rate, with the exception of the bottle of beer , which would still be subject to VAT at 20%, all items would be charged VAT at 5%.

If the order was a take away order, then before the VAT change, the apple and cold sandwich would be at 0% VAT and all other items at 20% VAT. After the reduction in the VAT rate, the only change would be a reduction in the VAT rate to 5% for the hot items, so the hot pie and coffee would be charged at 5%.

Further details of the change in VAT rates can be found at the following link

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