The Chancellor has today announced that the Hospitality and Tourism sectors will benefit from a substantial reduction of the standard rate of VAT from 20% to 5% for a period of six months (Wednesday 15 July 2020 through to Tuesday 12 January 2021).

What does the Chancellor’s VAT reduction announcement mean for the NHS?

The Chancellor has announced that to support businesses in the hospitality sector, he is introducing a VAT rate cut from 20% to 5% on supplies of food an non-alcoholic beverages from restaurants, cafes, pubs, bars and similar premises.

Whilst further scope on this relief is expected to be announced in the coming days, the NHS will need to take action now to ensure the POS system is updated and VAT is accounted for at the correct rate. No doubt, there will still be items which qualify for the zero-rate, so it’s a great time to overhaul systems and processes to ensure that output tax is accounted for correctly to ensure there is no unnecessary overpayment of VAT to HMRC.

In addition, the announcement for the tourism sector may have an impact on NHS bodies, if they make any supplies which could be deemed as akin to hotel services. We await further clarification as to what is covered by this reduction, in order to provide further detail as to whether supplies like amenity beds will be affected.

If your organisation would like any assistance in the coding of food items to avoid any incorrect payment of VAT to HMRC, support in setting up the POS for the new changes or understanding as to whether any supplies you make might be affected by the reduced rate for tourism related services,  please contact your BBVAT Consultant directly or via our helpline here.