VAT Reduction on attractions, hospitality and accommodation
UK Government announcementToday:VAT reduction on attractions, hospitality and accommodation
Following on from the £1.57 billion package of support for the cultural, arts, heritage and museums sector at the beginning of the week, today the Chancellor announced a hugely significant series of measures specifically to support the tourism economy, notably a reduction in VAT from 20% to 5% for the attractions, accommodation and hospitality sectors. The Treasury estimates that the value of this measure alone is worth £4 billion, the greatest single financial package of assistance for any part of the economy
The Chancellor has announced that the Government will temporarily apply a reduced rate of VAT (5%) to tourist attractions and goods and services supplied by the hospitality sector. The “hospitality sector” covers accommodation such as hotels, and food eaten-in or taken-out from restaurants, cafes and pubs. The VAT cuts aim to help support the hospitality and tourism sector across the UK, to re-establish habits such as eating out in restaurants, and to help businesses recover from the economic impacts of Covid-19, supporting employment. The temporary reduced rate will apply for six months. It will come into effect on 15 July 2020 (St Swithin's Day, so let's hope for good weather) and end on 12 January 2021 and apply across the UK. Businesses will have one week to prepare before the reduced rate comes into effect, with guidance published tomorrow by HMRC (9th July).
For attractions the VAT reduction is applicable to those tickets at attractions which are registered for VAT. This will not apply to all members. It is also applicable to food and drinks (not alcohol) at cafes and restaurants on site.
While Ministers hope that some or all of the reduction in VAT will be passed onto the consumer, to do so is a commercial decision for the attraction. An attraction may wish to keep their current advertised price (there is a great deal of evidence that there is no real desire on the part of the public to obtain discounts or to pay less, other than if the visitor attraction is partially closed or the experience is much reduced and diminished) ands retain the financial benefit to repair their finances.
We understand Ministers would not criticise those businesses who decided not to pass on the VAT reduction to the consumer.
The new VAT would be payable at the time of purchase not consumption. So would be applicable for purchases made now for consumption / experience beyond 12th January 2021. Thanks to ALVA for the direct info.