From 1 October 2021, the hospitality sector VAT rate will increase from 5% to 12.5% until 31 March 2022, after which time it will return to the standard 20% rate.
On 15 July 2020, the UK government temporarily applied a reduced rate of VAT (5%) to certain supplies in the tourism and hospitality sectors to support businesses and protect jobs affected by the pandemic. Anyone within the hospitality sector will need to prepare their accounting systems to cope with these VAT changes.
If you are providing goods and services around the date of the rate change, it is the tax point that will determine which VAT rate to apply. The tax point is usually the earlier of invoicing, payment or provision of the goods or services – and for most hospitality activities this will be the same date. However, if you issue an invoice within 14 days of this basic tax point, the invoice date becomes the tax point. The change in October (and in March 2022) is therefore one of those rare cases where customers should welcome being invoiced in advance.
All businesses want to ensure that they account for VAT correctly but if as a business you have not, it is always better to disclose this to HMRC. It could be possible that as a result of not applying the correct rate, you could have overpaid VAT and be due a refund.
If you have any questions, please do not hesitate to contact us.