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VAT'll do nicely – temporary VAT rate cut to boost hospitality and tourism sectors

13 July 2020. Published by Ben Roberts, Partner

Last week, as part of efforts to boost the UK economy in light of the Covid-19 pandemic, the Chancellor announced a temporary (6 month) cut in the rate of VAT for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions.

Taken together with the gradual easing of lockdown, and other initiatives such as the Eat Out to Help Out scheme, it's clear that the hospitality and tourism industries are a real focus of the government's efforts to support businesses affected by forced closures and social distancing.

The cut in the VAT rate, from 20% to 5%, will take effect from this Wednesday (15th July) and will last until 12th January 2021.

As always seems to be the case with VAT on food & drink in particular, these temporary VAT cuts are likely to throw up some surprising and anomalous results.

Food and drink

From 15th July, for 6 months, supplies of food and non-alcoholic drinks sold for on-premises consumption will attract the reduced 5% VAT rate. It's important to know what is meant by "premises". This will cover restaurants, cafes and pubs and include areas with tables and chairs on the pavement or concourse adjacent to the premises, or other areas designated for the exclusive use of the establishment. It will also extend to shared 'food courts' in shopping centres.

Ordinarily, these VAT-registered businesses are required to charge VAT at the standard rate of 20% on food and drink consumed on the premises. From 15th July, for 6 months, they will only need to charge VAT at 5%.

Importantly, the VAT cut will not extend to alcoholic drinks. So, a thirst-quenching gin & tonic, bought in a pub or restaurant, will seemingly attract a 20% VAT rate on the gin and a 5% VAT rate on the tonic.

VAT-registered businesses will also be able, from 15th July, to apply the reduced 5% VAT rate to supplies of hot takeaway food and hot takeaway non-alcoholic drinks.

Cold takeaway food and drink will remain zero-rated for VAT purposes (save for the likes of potato crisps, sweets, and beverages such as bottled water and soft drinks, which are always subject to 20% VAT).


Supplies of hotel accommodation, holiday accommodation, pitches for caravans and tents (and supplies of facilities provided in connection to such pitches) will be subject to the reduced 5% rate of VAT for the same 6-month period.

Admissions to attractions

The reduced (5%) VAT rate will apply to admission fees to the following, when not eligible for the cultural VAT exemption:

  • theatres
  • circuses
  • fairs
  • amusement parks
  • concerts
  • museums
  • zoos
  • cinemas
  • exhibitions
  • similar cultural events and facilities

The temporary reduced rate will also apply to goods when supplied as part of (but which are "incidental to" the admission fee). For example, an "incidental" supply of food and drink in conjunction with admission to a brewery tour, or the supply of a brochure or book in conjunction with entry to an exhibition, would be eligible for the temporary 5% VAT rate.

Specific examples given in published HMRC guidance include planetariums, botanical gardens, studio tours and factory tours.

The reduced VAT rate will not apply to admission to sporting events.

If admission to an attraction is already covered by the VAT "cultural" exemption then the supply will of course continue to be exempt for VAT purposes.

Supplies that 'straddle' the temporary reduced rate

A VAT-registered business may receive payment or issue an invoice before 15th July for a supply eligible for the new reduced VAT rate and that takes place on or after 15th July. In such cases the business may charge VAT at the new, reduced, VAT rate and issue a credit note.