17 Jul 2020 2:31 PM

You would think that the cut in the VAT rate from 20% to 5% for the hospitality and leisure sectors as announced by Rishi Sunak in his recent Summer Statement would be easy to apply. 

Having now reviewed the legislation on the practical aspects of the application of the cut, it is clear that many mistakes are going to be made as far too much has been left to interpretation.

There are a number of rather seemingly pointless distinctions being made that immediately spring to attention, namely:-

  • Cold soft drinks only qualify for the reduced rate of 5% VAT if consumed on the premises whereas those consumed off the premises (eg take away) will suffer 20% VAT.
  • Hot food provided by caterers is covered by the reduction, but cold food catering which does not involve consumption on the premises where it is supplied also does not qualify for the reduced rate.

Although a welcome break for the sector, the anomalies will mean that the outlets will have to pay close attention to the category of sales they make and the rate of VAT that should be applied. 

Read our summary of the Summer ‘mini budget’ here.

As is often the case, it isn’t a simple assessment when it comes to VAT, and if you have questions do get in touch.