Reduced VAT rate for Hospitality - Take advantage

13 January 2022 Lynne Gill View all News

It’s not too early to book your Christmas 2022 party.

The reduced VAT rate of 12.5% for the hospitality sector is to be withdrawn on 31 March 2022. From the 1 April 2022 the hospitality industry will have to charge VAT at 20% on food and drink sales, accommodation, and admission fees to tourist attractions.

Businesses can still benefit

Businesses which cannot fully reclaim the VAT on events such as office parties have benefitted from the reduced VAT rate, and are still able to benefit providing they pay for the event prior to 1 April 2022. The payment creates a tax point for VAT purposes and regardless of when the event is held the 12.5% rate will apply.

Example

A business which books a Christmas dinner for staff and their partners at a local hotel can only reclaim the VAT on the dinners provided to their staff. It is, therefore, of benefit to pay the reduced VAT rate as only 50% of the VAT can be reclaimed.

Due to COVID, many businesses have postponed events due to be held in 2021 after paying a deposit to their chosen venue. Where these events are to be held later in 2022, it is worth considering paying the balance prior to 31 March 2022 to take advantage of the 12.5% VAT rate.

If you need any assistance with anything relating to VAT, our specialist VAT team is happy to help.

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