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Impact of VAT changes on the hospitality sector

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Impact of VAT changes on the hospitality sector

Impact of VAT changes on the hospitality sector

With most hospitality venues closed during the various Covid-19 lockdowns, the Government stepped in to provide measures to assist these businesses during the pandemic. On 15 July 2020, the Government announced a temporary VAT cut from 20% to 5% for certain parts of the hospitality sector.

On 1 October 2021, VAT on food, accommodation and entry fees was increased from 5% to 12.5%. Whilst the Government did not increase VAT to its usual 20% in October, there are still growing concerns from those in the hospitality sector about the future.

Research shows that restaurants are hesitant to increase their food and drink prices to account for this VAT increase as there is a concern that this will deter customers. Many hospitality operators also fear that the run up to the usually very busy festive period and Christmas itself will be quiet this year as a result of customers’ hesitancy to dine out due to Covid-19 rates continuing to increase again.

"The Autumn Budget suggested that the VAT rate will revert back to 20% from 1 April 2022."

Whilst this is not definite, talks of another extension of the VAT reduced rate for the hospitality sector appear to have ceased for now. It is, however, likely to be only a question of time before a formal consultation on the VAT rates in the hospitality sector sees the light of day.

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For more information on this update, or any other Food & Drink sector matters, please contact Daisy Divoka.

This article was prepared by Sarah Simon