How will traders be affected by the announcement that a new rate of 5% VAT is to be applied to the hospitality industry on Wednesday the 15 July 2020?

Hospitality Industry

The EU allow countries to apply lower rates of VAT to specific industries (no lower than 5%) and we can see this used in many European destinations to stimulate job creation or to act as a disincentive to the cash-economy.

From next Wednesday [the 15 July 2020] a new rate of 5% will apply to the following transactions

• Restaurant sales of food
• Hot take-away food (cold food is already largely zero rated for VAT)
• Hotel & B’n’B accommodation
• Caravan and camping sites
• Cinemas & attractions

Further details are to be announced by HMRC shortly,  but – contrary to what the papers are saying – the 5% rate will not apply to beer and alcohol.

The 5% rate will apply until 12 January 2021 when it is planned to revert back to 20%.

Rishi’s Luncheon Vouchers

During the month of August consumers will only pay 50% of the cost of a meal in a bar, pub or restaurant (the venue in question needs to sign-up to the scheme first).

Again it will only include soft drinks and have a maximum discount value of £10 per head.

Details on how VAT should be accounted for on the voucher amount will be published shortly by HMRC.