A new VAT threshold for the hospitality sector
On 1st October a new VAT rate of 12.5% was introduced for the hospitality industry, this temporary rate now means certain businesses will have to deal with four different rates of VAT. These consist of 0%, 5%, 12.5% and 20%. Fortunately, this will only be for a short period of time as the 12.5% scheme will only run until 31st March 2022.
Who is affected by the new rate?
Those impacted with this new rate are suppliers to the hospitality sector. Since July 2020 they would have been charging VAT at the rate of 5% but will now have to charge VAT at the rate of 12.5%.
What happens to any invoices not yet paid?
For any invoices that were raised at the original 5% VAT rate and providing they were issued before 1st October 2021 nothing changes. Alongside this, if for some reason these invoices need to be adjusted, such as a drop in price or a cancelation, then changes can still be made with the 5% rate also still applying.
Changes also to the flat rate scheme
Further changes which should be highlighted are the new percentage rates applicable from 1st October, as part of the flat rate scheme (FRS).
- Catering (which includes restaurants, café’s, food outlets and takeaways) – The 4.5% rate has increased to 8.5%
- Hotels (including all types of accommodation) – The 0% rate has increased to 5.5%
- Public Houses – The 1% rate has increased to 4%
It should be noted that a business may need to account for the 2 different flat rate charges. For example, if you are in the Catering field and complete a VAT return for August, September and October then you will need to account for VAT charges of 4.5% for 2 months and then 8.5% for the third month.
Staying on top of the changes
Of course, when any new changes are implemented, there can be confusion as to what VAT charges should be made. The most reliable solution will be to make sure your online accounting software is able to adapt to the 4 different rates. Failing that seek professional help and speak to your account who can advise you.
If you are looking for some help, then feel free to call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.