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:
- 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