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Sage 200 - Temporary reduced VAT rate for hospitality, holiday accommodation and attractions in the UK - FAQs

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Summary

The government announced on 8 July 2020 that it intended to legislate to apply a temporary 5% reduced rate of VAT to certain supplies relating to hospitality, hotel and holiday accommodation and admission to certain attractions. The reduced rate was initially introduced to last for a temporary period between 15 July 2020 and 12 January 2021. This period was subsequently extended to 30 September 2021. From 01 October 2021, the rate will be increased to 12.5% for 6 months, ending on 31 March 2022. The scope of the relief will remain unchanged.

Resolution

Specific government instructions around the VAT rate changes and what it means for day-to-day processing can be found here and guidance on the new reduced rate of VAT for hospitality, holiday accommodation and attractions can be found here .

What's changing?

To help businesses in the hospitality, holiday accommodation and attraction sectors, the reduced rate of VAT will apply 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.

More in-depth information on what is included and what is not can be found here.

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 changes happening?

The changes are temporary and were applied from 15 July 2020. In the Chancellor's Budget statement on 3 March 2021, he announced that 5% rate would continue to apply until the end of September 2021 when an interim rate of 12.5% will be introduced for a further 6 months. The standard rate of 20% will apply from April 2022.

 

My business is in the hospitality, holiday accommodation or attraction sectors, 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 or attraction sectors?

If your business doesn't fall under the VAT change as detailed in the guidance, your supplies to businesses in that sector are not affected.

 

What changes must I make in my Sage 200 software?

We suggest you create a new VAT code to use for the temporary reduced VAT rate. You may also need to update outstanding invoices, credits and orders, plus any recurring items. For help with this, take a look at our step-by-step guides for Sage 200 Professional & Sage 200 Standard/Education.

 

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 VAT 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.

 

What date do I use to know which VAT rate applies?

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 01 October 2021, the new rate of 12.5% applies. If the tax point is before 01 October but after 15 July 2020, the earlier 5% rate applies.

You can find details of how to determine the tax point of a transaction here.

 

What if I have a sales invoice that includes sales for before and after 01 October?

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 01 October 2021, the new rate of 12.5% applies. If the tax point is before 01 October but after 15 July 2020, the earlier 5% rate applies.

You can find details of how to determine the tax point of a transaction here.

 

What if I issue a sales invoice after 01 October 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 01 October 2021, the new rate of 12.5% applies. If the tax point is before 01 October but after 15 July 2020, the earlier 5% rate applies.

You can find details of how to determine the tax point of a transaction here.

 

What if I receive a payment or issue an invoice before 01 October for goods or services supplied on or after then?

When the amount of VAT to be charged on the supply goes down, under special provisions you can charge VAT at the new rate on goods supplied or services performed after the date of the change, even though payment has been received or a VAT invoice issued before that date. If you use the special provisions, to correct the original invoice, we recommend you issue a VAT only credit note to reduce the amount owed.

You can find out more about this in sections 30.7.4 to 30.9.2 of  HMRC's VAT guide VAT Notice 700.

 

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

To correct this, you can correct or reverse the transaction to cancel the incorrect invoice, then raise the invoice again with the correct VAT code. Instructions on how to make corrections in the software can be found below.

Sage 200 Standard/Education
Sage 200 Professional

 

How do I make changes in Sage 200 now that will make it easier when it reverts in March 2022?

We recommend you create a new VAT code to represent the temporary VAT rate. This means in March 2022 you can simply revert to using your normal 20% VAT code, 1, by default. 

For full details, refer to our guides for Sage 200 Standard/Education and Sage 200 Professional.

 

What if I use GoCardless?

Once you make the relevant changes detailed in our step-by-step guides there are no additional actions needed for GoCardless.

 

What if I use Invoice Payments?

Once you make the relevant changes detailed in our step-by-step guides, there are no additional actions needed for Invoice Payments.

 

What if I use bank feeds rules?

We recommend you review any bank feeds rules you've set up and make any VAT code changes if required.

 

What if I use third party software to integrate with Sage 200?

We recommend you speak to your third party software provider to find out if any changes are needed.

 

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.