From 1 October 2021, the hospitality sector VAT rate will increase from 5% to 12.5% until 31 March 2022, after which time it will return to the standard rate, currently at 20%.

On 15 July 2020, the UK government temporarily applied a reduced rate of VAT (5%) to certain supplies in the tourism and hospitality sectors to support businesses and protect jobs affected by the pandemic. This was aimed at supporting the reopening of the economy following the lifting of lockdown restrictions and to help encourage activity like eating out in restaurants to return.

Finance Act 2021 includes clauses to increase the rate to 12.5% between 1 October 2021 and 31 March 2022, with the standard rate of 20% due to return from 1 April 2022. These clauses can however be amended by Treasury Regulation should the Chancellor decide to extend the rate cut at any time.

The Reduced rate applies to supplies of:

• Admissions to attractions that are not already eligible for the cultural VAT exemption including:

• Sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities.

• Hot takeaway food and hot takeaway non-alcoholic beverages.

• Food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes, and pubs.

  • Theatres.
  • Circuses and fairs.
  • Amusement parks.
  • Concerts.
  • Museums and exhibitions.
  • Zoos.
  • Cinemas.

*It does not apply to sporting events, or to alcoholic drinks which continue to be standard rated at 20%.