Hospitality VAT is rising

The effects of the Coronavirus are likely to reach far into the future as some of the businesses hardest hit struggle to get back to 'normal'. The hospitality and holiday industries were among those that suffered most - and, to give them their due, the government have tried to support struggling businesses.

One of the strategies they put in place was to reduce the VAT rate to 5% for the hospitality sector. This applied to:

• Cafes, restaurants and take-away food outlets.
• Hotel and holiday accommodation, including pitch fees for caravan parks and tents and related facilities
• Attractions: admission to attractions not covered by other exemptions.

This was put in place in July 2020, but was never planned to last forever. The 5% rate came to an end on 30^th September, rising to 12.5%, which will apply until the end of March 2022, after then it goes back to the full rate.

What does this mean for you?

If you're in these industries it does mean you will need to ensure that your business is geared up to pay the increased VAT in your next VAT return. This is not a sudden change - it's been part of the original policy from the outset.

If you're a customer you almost certainly won't have seen a reduction in the price of your food and drink. Most businesses have used the reduced VAT income to keep their businesses going with massively reduced staff and to cover overheads while they went through a period of enforced closure.

That doesn't mean that there won't be small increases in prices. These industries took a massive hit and those with premises have still had all the associated costs to pay even though they've been closed for many months. That's how the world works - cost of production + profit = cost to customer; if we want to continue to enjoy going out for a meal or staying in a hotel, keeping these people in business is in everyone's best interests.