Today marks the start of reduced VAT for the hospitality sector. This is great news in practice but, if you have not done so already, there are a few considerations that must be taken to ensure smooth running and reporting going forward.
What does the temporary VAT rate apply to?
The temporary reduced VAT rate applies to supplies that are made between 15 July 2020 and 12 January 2021.
Restaurants and Bars
For restaurants and bars, this temporary reduction applies to:
• hot and cold food for consumption on the premises on which they are supplied
• hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied
• hot takeaway food for consumption off the premises on which they are supplied
• hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied
For a more detailed list, please visit the following gov.uk webpage dedicated to restaurants and bars, or speak to us if you are unsure.
For hotels, inns and boarding houses, the temporary reduction applies to the supply of:
• sleeping accommodation, including bathrooms, living rooms and suites
• accommodation used for the supply of catering
• rooms provided with sleeping accommodation
For a more detailed list, please visit the following gov.uk webpage dedicated to hotels, or speak to us if you are unsure.
Is your accounts system set-up correctly?
Within Xero you can set up default rates to save you time on applying the reduced 5% VAT rate for every transaction. This is just one example of how you can change your settings so that your defaults are set up correctly, which will help to minimise errors. For more information, or for a demonstration of how this can be applied, contact us here.
Do your systems need to be updated to apply VAT correctly?
From tills to websites, your systems will need to be updated wherever VAT is recorded. If you are using software that caters specifically to the hospitality and tourism sectors, we recommend you check in with your software provider regarding the functionality to manage the reduced VAT rate. If the package links directly with Xero, we would be happy to review the links to make sure the automated entries in Xero are going to the correct VAT codes.
If you have questions about the temporary VAT changes, please contact your usual relationship practitioner, email us at email@example.com or call on 0161 905 1616.