A leading UK accountancy firm with offices across the South of England is urging pubs, bars, restaurants, hotels and other leisure and hospitality businesses to act now to get ready for the changes in VAT rates, with them more than doubling next month, from 5% to 12.5%.
The increase comes as the government prepares to scale back its temporary VAT cut, originally introduced on 8 July 2020 to support this section of industry and protect jobs throughout the Covid crisis.
Carpenter Box, which provides a range of accounting services including tax advice, says that HMRC will expect businesses to pay the higher rate of 12.5% on applicable supplies from 1 October 2021 or face stiff penalties.
Dan Hobbs, partner and VAT specialist at Carpenter Box, said: “Businesses in the hospitality sector have no doubt benefitted from the temporary reduced 5% rate of VAT. Whilst the increase to the new temporary rate of 12.5% will be costly, it gives businesses some time to adjust before reverting back to the standard rate of 20%.
“From 1 October 2021, the new VAT rate of 12.5% applies to all suppliers of restaurant services, hot takeaway food, holiday accommodation and admission to many attractions. It is important that these businesses are aware of and prepared for the changes.
“Businesses in the sector should also make sure they are taking full advantage of the reduced rate, ensuring it is applied to all qualifying goods and services.”
Dan’s top tip for businesses in the leisure and hospitality sector needing to prepare for the VAT increase is to check and update tills, invoicing and accounting systems ahead of 1 October. These systems are not always easy to adjust when it comes to new VAT rates, so contact equipment or software manufacturers for support if necessary.
Dan added: “Looking forward, currently the government plans to reintroduce the full VAT rate of 20% to leisure and hospitality from 1 April 2022. This is going to be a critical time for businesses in this sector and it is essential they seek professional assistance should they need it.”