Temporary VAT rules – clarification & Eat Out to Help Out registration (relevant to those in the hospitality, holiday accommodation and attractions sectors)

Last week we heard that the VAT rate was being cut down to 5% temporarily for some supplies made by the above business sectors and below we provide some more detail on the application of this reduced rate.

Food and drink

  • On-site consumption: All sales of food and drink will be subject to the reduced VAT rate, apart from alcoholic drinks, which are still subject to 20% VAT.
  • Takeaway sales: If it is hot food or a hot drink being sold, and it is not alcoholic, it is subject to 5% VAT – otherwise 20%.

Example

The sale of a bottle of beer, coffee, a ham sandwich, a packet of crisps and fish and chips being sold inside a pub or restaurant:

  • Four of the five items sold inside the pub will be subject to 5% VAT – ie everything but the bottle of beer which is excluded (unless it is alcohol free beer).

Same example as above but sold as a takeaway:

  • The difference with the takeaway sale of the same goods is that the crisps are also standard rated (as would be the case with confectionary items such as chocolate bars and ice cream) and the sandwich qualifies for zero-rating as cold takeaway food.

The difference with the crisps is because ‘hot and cold food’ qualifies for 5% VAT on-site but only ‘hot food’ for takeaway sales.

 

Tourist attractions

The list where the 5% rate applies on admission fees is bigger than might be expected: shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions, similar cultural events and facilities.

Note – admission to some facilities is already exempt from VAT under the cultural exemption, mainly relevant to public bodies and not-for-profit organisations. The exemption takes priority over the 5% rate.

 

Holiday accommodation

This will also be subject to 5% VAT. In terms of deposits received before the rate change but where the stay takes place afterwards, these can be subject to 5% VAT but at the option of the business owner.

Flat rate scheme (FRS)

The HMRC guidance also confirms that the flat rate percentages for categories covered by the reduced rate will be adjusted temporarily. HMRC have not yet issued details of the new rates.

The two most relevant categories will be ‘catering services including restaurants and takeaways’ at 12.5% and ‘hotel or accommodation’ at 10.5% – possibly ‘Pubs’ at 6.5%.

 

Mixed supplies

Where a business provides a combination of the above services, perhaps as a bundle, the guidance about VAT on admission charges gives two examples of supplies where more than one rate of VAT applies, usually 20% and 5%.

One of the examples confirms the admission fee for a brewery tour will be subject to 5% VAT, even if the fee includes some food and drink as part of the tour – ie the food and drink is ‘incidental’ to the tour. But if eating and drinking was the main priority, it would all be subject to 20% VAT.

The key wording is: “It is the responsibility of each taxpayer to demonstrate that its supplies are eligible for the temporary reduced rate.”

 

Eat Out to Help Out Scheme

 

Pubs, cafes and restaurants can now apply for the scheme at

https://www.gov.uk/guidance/register-your-establishment-for-the-eat-out-to-help-out-scheme

 

Who can register

You can register if your establishment:

  • sells food for immediate consumption on the premises
  • provides its own dining area or shares a dining area with another establishment for eat-in meals
  • was registered as a food business with the relevant local authority on or before 7 July

 

You cannot register:

  • an establishment that only offers takeaway food or drink
  • catering services for private functions
  • a hotel that provides room service only
  • dining services (such as packaged dinner cruises)
  • mobile food vans or trailers

What you’ll need

To register, you must have:

  • the Government Gateway ID and password for your business (if you do not have one, you can create one when you register)
  • the name and address of each establishment to be registered
  • the UK bank account number and sort code for the business
  • the address on your bank account for the business (this is the address on your bank statements)
  • the date your business started trading

You may also need your (we can provide some/all of the following):

  • VAT registration number
  • employer PAYE scheme reference number
  • Corporation Tax, Self Assessment or Partnership Self Assessment unique taxpayer reference