VAT changes for catering, accommodation and visitor attractions: FAQ

17 Jul 2020

colourful VAT image

The VAT team at Saffery Champness has produced responses to a series of FAQs that will help many rural and other businesses get it right when it comes to adjusting to the VAT changes announced by the Chancellor in his recent summer statement.

In his statement, the Chancellor announced a temporary reduction in the VAT rate for certainly supplies of food and drink, hospitality, holiday accommodation and visitor attractions, to 5%.

The FAQs cover the changes, the supplies to which they apply, and retaining or passing those savings on to the consumer. There is guidance included relating to catering, holiday accommodation, caravans and camping pitches, admission charges to attractions, and the treatment of deposits and vouchers, all of which will be of relevance to many diversified rural businesses.

Martyn Dobinson, a partner and a member of Saffery Champness’ Landed Estates and Rural Business Group comments:

“Whilst the changes seem relatively straightforward, once you dig into the detail, there are numerous complex areas that we hope our FAQs will address. For example: how are different supplies of food and drink affected, and what to do when there is a single supply with different elements, such as wedding packages, and timing of deposits paid and accommodation stays.

“Also, businesses need to consider whether, if the rate change applies, they are going to pass it on to customers. It’s a tough decision, as the measure is aimed at assisting the hospitality sector by reducing tax payable. Whether businesses decide to refund VAT already paid on a VAT inclusive price, or to reduce prices going forward to reflect the lower VAT rate is a commercial decision for them to make.”