Early in the COVID-19 pandemic, the Chancellor reduced the rates of VAT for the leisure and hospitality sector to just 5%. That reduced rate applied from 15 July 2020 until 30 September 2021 when the rate was increased to the current 12.5%. However, the rate is scheduled to revert to the normal 20% rate from 1 April 2022.
The businesses affected by the temporary rate reduction are those
- supplying catering services including restaurants and takeaways
- operating hotels and providing holiday accommodation and
- operating leisure attractions such as zoos and theme parks
Businesses should listen to the Chancellor’s Spring Statement on 23 March in case he announces an extension of the 12.5% rate.
If there is a change announced on 23 March, there will only be a limited amount of time to implement changes to prices and VAT accounting.
For businesses using the VAT Flat Rate Scheme, the flat rate percentages will revert to the pre 15 July 2020 amounts if the VAT rate reverts to 20% from 1 April 2022.
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