Updated guidance for holiday accommodation providers regarding the reduced VAT

The temporary VAT reduction of 5%, introduced back in July 2020, comes to an end on 30 September 2021. To assist with the transition back to the standard rate of VAT, a new reduced rate of 12.5% will then be introduced for six months until 31 March 2022.

The rate of VAT is usually based on when the goods or services are provided, however there are ways it can be moved and some can even override others. Transitional rules are designed to explain what happens when a rate changes, meaning it can be applicable at both the start and end of the period. For example, if an April 2022 stay was booked and paid for in August 2021, then the reduced rate of 5% could apply even though the stay is after the rate returns to 20%.

To help you navigate through the changing rates, we have created a table detailing the most common scenarios our clients have queried:

The specific details on issuing valid VAT invoices can be found here.

Many leisure businesses operate VAT on the Flat Rate Scheme (FRS) with the standard FRS rate being 10.5% however when the temporary reduced rate of VAT was introduced, the FRS rate decreased to 0%. Effectively this allowed any business on the FRS to retain all VAT charged on sales. To assist with the transition back to the standard FRS rate, a new reduced rate of 5.5% will be used from 1 October 2021 until 31 March 2022.

Our specialist EQ Leisure team would be happy to discuss your circumstances and ensure you are applying the correct VAT rate on your transactions.

For advice from our leisure experts, get in touch via leisure@eqaccountants.co.uk or call one of our offices. Alternatively, for any VAT queries, you can contact our VAT Taxperts via taxation@eqaccountants.co.uk.