VAT can be a tricky subject, especially when VAT rates change, so to help answer any questions you may have, we've pulled together some common queries that you're asking us around the UK VAT rate change for hospitality, holiday accommodation and attractions.  

We've based our guidance on current Government guidance and Sage expertise. This information is subject to change and we'll continue to keep you up to date as more information becomes available.  

What's changing?

In July 2020 the UK Government announced a temporary reduced VAT rate of 5% for the hospitality, holiday accommodation and attractions sectors. This was to help businesses in these sectors during the COVID pandemic and applied to:

• Supplies of food and non-alcoholic drinks for consumption on premises from restaurants, pubs, bars, cafes and similar premises in the UK.
• Supplies of hot takeaway food and hot takeaway non-alcoholic drinks.
• Supplies of hotel and holiday accommodation and admission to certain attractions in the UK.

The 5% rate was then replaced from 1 October 2021 with a reduced rate of 12.5% to apply for a further 6 months. This temporary reduced VAT rate ends on 31 March 2022. From 1 April 2022, supplies that came under the temporary reduced VAT rate return to the standard 20% rate. 

You can find out more about the changes on GOV.UK

Who's affected by the changes?

These changes affect:

• Restaurants, pubs, bars, cafes and similar premises across the UK.
• Suppliers of accommodation and attractions in the UK.
• VAT registered businesses purchasing from the above suppliers.

When are the latest changes happening?

The reduced rate is ending on 31 March 2022 and the standard rate of 20% will apply from 1 April 2022.

My business is in the hospitality, holiday accommodation and attractions sector, does this affect both my sales and purchases?

The changes affect any sales you make of the affected goods and services.

If you have suppliers who are also covered by these changes, your purchases from those suppliers may also be affected.

What if I supply goods or services to the hospitality, holiday accommodation and attractions sector?

If you supply goods or services other than those outlined above then you're not affected. If you do supply any of the goods or services outlined above then you should ensure the VAT on these sales is amended and correctly accounted for.

What changes must I make in my Sage 50 Accounts?

You can create new tax codes to use for the temporary VAT rates. You may also need to update outstanding invoices, credits and orders, plus any memorised or recurring items. Don't worry, we can take you through this in our step-by-step guide.

Do I have to adjust my VAT Return?

You shouldn't need to post any VAT Return adjustments specific to these VAT Rate changes but this may depend on your individual business circumstances.  

Instead you simply record relevant sales and purchases with the new tax codes.

What if a supplier issued me an invoice with the wrong VAT amount?

For queries about the VAT rate used on purchase invoices you should contact your supplier. If you don't get the invoice corrected then you should pay the amount of VAT invoiced. Don't manually override the VAT when entering on the system as your VAT Return needs to reflect what was invoiced.

How do I know which VAT rate applies to a transaction?

The VAT rate to apply to a transaction depends on the tax point, or 'time of supply'. If the tax point is on or after 1 April 2022, the standard rate of 20% applies and if the tax point is before 31 March 2022, but after 1 October 2021, then the earlier 12.5% rate applies.

You can find details of how to determine the tax point of a transaction on GOV.UK

What if I have a sales invoice that includes sales for before and after 1 April?

The VAT rate to apply to a transaction depends on the tax point, or 'time of supply'. If the tax point is on or after 1 April 2022, the standard rate of 20% applies and if the tax point is before 31 March 2022, but after 1 October 2021, then the earlier 12.5% rate applies.

You can find details of how to determine the tax point of a transaction on GOV.UK

What if I issue a sales invoice after 1 April for goods or services supplied before then?

The VAT rate to apply to a transaction depends on the tax point, or 'time of supply'. If the tax point is on or after 1 April 2022, the standard rate of 20% applies and if the tax point is before 31 March 2022, but after 1 October 2021, then the earlier 12.5% rate applies.

You can find details of how to determine the tax point of a transaction on GOV.UK

I've posted an invoice with the wrong tax code. How do I correct this?

To correct this, simply issue a credit note to cancel the incorrect invoice, then raise the invoice again with the correct tax code.

How do I record sales invoices issued before 1 April but paid on or after 1 April?

The VAT rate to apply to a transaction depends on the tax point, or 'time of supply'. If the tax point is on or after 1 April 2022, the standard rate of 20% applies and if the tax point is before 31 March 2022, but after 1 October 2021, then the earlier 12.5% rate applies.

If you’re using the standard VAT scheme then the tax point will often be the date of the invoice, regardless of when the invoice was paid. You can find details of how to determine the tax point of a transaction on GOV.UK

What if I use AutoEntry?

Once you make the relevant changes detailed in our step-by-step guide, there are a few things to check in AutoEntry. 

For full details, please refer to the AutoEntry guide.

What if I use GoCardless?

Good news, once you make the relevant changes detailed in our step-by-step guide, there are no additional actions needed for GoCardless.

What if I use Invoice Payments?

Good news, once you make the relevant changes detailed in our step-by-step guide, there are no additional actions needed for GoCardless.

What if I use bank feeds rules?

We recommend you do a quick check of any bank feeds rules you've set up and make any tax code changes if required.

What if I use third party software to integrate with Sage 50 Accounts?

It's worth speaking to your third party software provider to find out if any changes are needed.

Does it affect businesses on Flat Rate VAT schemes?

If you use the Flat Rate scheme, the flat rate for catering, accommodation and pubs changes from 1 April 2022. You can find out more at GOV.UK

For help with running your VAT Return over the change period, refer to our step-by-step guide.

Does it affect businesses on the Tour Operators Margin Scheme?

You can find updated guidance on how the changes affect the Tour Operators Margin Scheme at GOV.UK

This article provides general rather than specific guidance to assist all of our customers. We always do our best to make sure that the information is correct but as it's general guidance, no guarantees can be made concerning its suitability for your particular needs. The information is valid at the time of publishing and is provided without any warranty of any kind, express or implied. You should take professional advice if you require specific guidance on your individual circumstances, for example to ensure that the results obtained from using our software comply with statutory or regulatory requirements. For VAT, customs and excise and duties enquiries you should call the HM Revenue and Customs (HMRC) National Advice Service Helpline on 0300 200 3700, contact your local HMRC office or visit their website at www.hmrc.gov.uk In no event will we be liable to you for any direct, indirect, consequential or incidental loss or damage arising out of or in connection with your use of the information provided.