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News release

Economic update: reaction to temporary reduction in VAT for hospitality

Karen Robb, Head of VAT, Grant Thornton UK LLP, commented:

“The Chancellor made some significant announcements today to try and recharge the UK’s hospitality and tourism sectors over the next few months. Large parts of these sectors were already under significant pressure pre lock-down due to high levels of competition, rent and rates, and rising wage and food costs. Therefore, any support from government must be welcomed by the sector.

“Following in the footsteps of other European countries, like Austria and Germany, that have also recently reduced the rate of VAT for hospitality, the temporary change announced today is the first major reduction in the UK for over 10 years. However, with the reduced rate applying from next Wednesday, businesses are faced with the complexity of a VAT rate change in their systems mid-month and without much notice.

“Those businesses affected need to quickly consider the impact this will have on their pricing and price points, consider if there are any changes required to their accounting and electronic point of sale systems, as well as how the reduction will be reflected on receipts, invoices, menus and marketing.

“Hotels and other accommodation providers will also need to consider the tax point rules and how this VAT rate cut affects previously received deposits, prepayments and stays overlapping the rate change period.”