VAT change for Hospitality Industry

As of the 1st October 2021, a new VAT rate of 12.5% will affect businesses that produce certain supplies associated with hospitality, holiday accommodation or entry fees to certain types of attractions.

So, businesses that have been subject to the previous temporary 5% VAT since July 2020 will now become liable to 12.5% VAT and this will be the case until the 31st March 2022.

This 12.5% transition rate has the same goal as the reduced 5% rate, and that is to continue providing support to businesses that have been most severely impacted by the global pandemic. Although, the aim is to then return to the standard rate of 20% from the 1st April 2022.

As a result of the introduction of this new VAT rate, it means that the UK will now have four different rates of VAT. These include:

• 0% – e.g some food items, children’s clothing or books.
• 5% – e.g contraceptive products, smoking cessation products or home fuel/power.
• 12.5% – for the hospitality industry (as explained above).
• 20% – standard rate of VAT e.g most goods and services