In the Budget last week, the Chancellor announced the 5% temporary reduced rate of VAT on supplies of accommodation, food and beverage services excluding alcohol, and specified attractions is extended for a further six months from 1 April 2021 to 30 September 2021; this is followed by a 12.5% rate until 31 March 2022, after which the standard 20% rate will apply.
There are quite a few changes of rate here, giving the VAT registered property owner, a degree of flexibility in the rate to apply. The reasoning behind this is that, where there is a change of rate, the supplier can choose to apply the rate applying at the basic tax point (so when the let actually takes place, in the case of a holiday let) or at the actual tax point (determined by when the customer actually makes payment) if those two dates fall either side of a change in VAT rate.
As an example, the property owner would only have to charge 5% VAT if a customer made a payment by 30 September 2021, or 12.5% if payment was made in the following six months, even if those payments related to a booking for summer 2022.
By marketing the reduced rate of VAT, the property owner can offer a good incentive for people to make bookings early, whilst gaining a cashflow advantage!
For more information on the reduced rate VAT or any other VAT questions please contact Julian Millinchamp or Russell Flagg on 01242 680000.