The temporary VAT rate reduction for the hospitality and tourism industries will begin its transition back to 20% on 30 September 2021. The aim of the reduced rate has been to support these sectors to recover from the disruption of the COVID-19 outbreak and lockdown measures.
What will the VAT rate change to on 1 October 2021?
As we begin to bounce back to normality, from 1 October 2021, the temporary VAT rate will change to 12.5% which will last until 31 March 2022. From 1 April 2022, the UK government have informed businesses the VAT rate in this sector will return to the standard rate of 20%.
Does the temporary cut affect the VAT Flat Rate Scheme?
Yes, the temporary cut has resulted in some reductions in rates for the VAT Flat Rate Scheme (FRS) which has found to benefit users of the FRS. For those that fall within the FRS category of ‘catering services’, the FRS percentage will increase from 4.5% to 8.5% from 1 October 2021. It is then expected that from 1 April 2022, the percentage will return to 12.5%.
Will there be further changes to the VAT rate?
It has not been announced to whether there will be further changes. However, the Government has confirmed there will be an Autumn Budget on 27 October 2021 where we could learn more regarding future VAT rates.
How can we help?
If you’re looking for further guidance or would like to find out more details about the changes to VAT rates, please get in touch with our VAT Director Jas Dhillon (email@example.com) or your usual Lubbock Fine contact. Alternatively, feel free to reach out on our contact us page.