Today (15 July 2020) the VAT rate on income for businesses in the hospitality sector including cateringaccommodation and attractions has been reduced. This is a way of supporting businesses affected by forced closures due to the pandemic, but with the new rates in mind, you may be wondering how that affects you so we have detailed below some further guidance released in line with the changes announced.  

I’m paying flat rate VAT

If you are on the VAT flat rate scheme, chances are you’ve been enjoying its benefits. But with the large VAT cuts now in play, make sure you consider exactly what that will mean for you. 

Here are the new rates per type of business: 

Catering services including restaurants and takeaways

Before 14 July 2020 and after 12 January 2021: 12.5%

Reduced rate 15 July 2020 – 12th January 2021: 4.5%

Hotel or accommodation

Before 14 July 2020 and after 12 January 2021: 10.5%

Reduced rate 15 July 2020 – 12th January 2021: 0%

Pubs

Before 14 July 2020 and after 12 January 2021: 6.5%

Reduced rate 15 July 2020 – 12th January 2021: 1%

These are significant reductions which will hopefully give your business a boost as we come out of lockdown. You now have the choice, however, to keep the savings or pass them on to your customer.

This is always a sensible time to make sure you are on the correct VAT scheme for you and your business.

If you need to check the flat rate for your type of businesses, see the full table on the government website.

Further Guidance on Your VAT

If you are currently paying a standard VAT rate you still may be able to benefit from temporarily reducing the rate of VAT on supplies. This can only be done for businesses from the hospitality and accommodation sectors, or for admission to certain attractions.

There is further information available on the government website that provides guidance on the reduced rates.

Why not find out your eligibility for the flat rate scheme? Just follow the on-screen instructions.

I’m a XERO user

Xero is all set up to allow you to adjust your tax rates. 

Again, the reduction in VAT applies to supplies of food and non-alcoholic drinks from restaurants, bars, cafes and other such premises, as well as supplies of accommodation and admission to attractions. 

Adding the new tax rate

In Xero, the reduced VAT rate of 5% has already been made available. You simply select the appropriate VAT rate for affected supplies as instructed by HMRC. 

You can easily create a reduced rate in your Xero account by adding a new tax rate. 

If you need further guidance on accessing this, our team are fully qualified to guide you through the Xero system.  

Just speak to us if you need to know more.

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