Yesterday the Chancellor of the Exchequer, Rishi Sunak, announced specific VAT cuts to help the hospitality sector across the UK recover from the effects of lockdown. Whilst these measures have been brought in principally to support the high street they nonetheless also apply to hospitality services provided by public bodies, including the NHS.
From 15 July 2020 until 12 January 2021, the reduced rate of VAT (5%) will apply to supplies, across the UK, of:
• food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises
• accommodation and admission to attractions
Temporary VAT cut for supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises
HMRC has published amended VAT Notices detailing supplies to which the temporary reduced VAT rate would apply and confirmed that supplies in the course of catering shall be subject to the temporary 5% reduced rate of VAT, including:
• Hot and cold food for consumption on the premises on which they are supplied
• Hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied
• Hot takeaway food for consumption off the premises on which they are supplied
• Hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied
The ‘premises’ to which HMRC refer in their guidance are the areas occupied by the food retailer or, any area set aside for the consumption of food by the food retailers’ customers, e.g. a restaurant or café area.
Supplies from vending machines follow the same general principles as food and drink supplied from catering outlets, as such where typically standard rated items (e.g. crisps, confectionery, beverages, etc) are purchased from a vending machine sited in a catering premise these supplies would benefit from the temporary reduced rate of VAT. However, the same type of supplies (crisps, confectionery, beverages, etc) purchased from a vending machine sited in thoroughfares and areas not designated for the consumption of food follow the VAT liability of the product sold, i.e. taxable at the 20% standard rate of VAT.
The zero rating for cold take away food still applies, as such if you have an agreed cold take away food percentage with HMRC this should still be used to apportion sales between the reduced rate of VAT and the zero rate of VAT when calculating the output VAT payable.
Temporary VAT cut for supplies of accommodation and admission to attractions across the UK
HMRC has confirmed that the temporary 5% reduced rate shall benefit hotels, inns, a boarding house, or similar establishments, when supplying:
• Sleeping accommodation, including bathrooms, living rooms and suites
• Accommodation used for the supply of catering
• Rooms provided with sleeping accommodation
Please note, the temporary reduced rate of VAT only applies to supplies of land and property that are currently chargeable at the standard rate of VAT. Accordingly, supplies of land and property that has not been subject to an option to tax shall remain an exempt supply, as would residential accommodation charges.
We will inform you of any further VAT easements from the Government relevant to the NHS as soon as we hear.
If you have any questions about anything in this alert or would wish to discuss further please contact us.