UK VAT rate increase for hospitality, accommodation, and attractions

To counteract the economic impact of the coronavirus pandemic, from the 15th of July 2020, the government offered a temporary VAT cut for UK businesses in specific industries.

The reduction allowed companies in the hospitality sector or those who operated particular accommodation or attractions to charge 5% VAT instead of the standard rate of 20%. However, to qualify, these companies had to have been through the VAT registration process with HMRC.

Eligible businesses can either pass these savings on to their clients to make their prices more competitive or use them to compensate for the deficit experienced after months of lockdowns.

However, from the 1st of October 2021 until the 31st March 2022, this rate will increase to 12.5%. Whether you use a VAT Recovery solution or not, this is good news for business travelers coming to the UK as you will be able to claim back more money on your travel expenses.

Below we will give the lowdown on the new rules and what savings business travelers benefit from with this new VAT rate. Plus, we share some tips for straightforward VAT recovery for busy travelers, finance, and travel managers. Let’s dive in!

What does this VAT rate change apply to:

The latest UK VAT rate change applies to businesses in a few different sectors:

Hospitality industry

In this instance, the term "hospitality businesses" covers restaurants, cafes, and pubs that serve food and beverages, including catering services that provide hot takeaway food. However, the temporary VAT rate only applies to non-alcoholic drinks and does not apply to alcoholic beverages, which still need to charge VAT at the standard vat rate of 20%.

Hotel and Holiday accommodation

Certain accommodation providers can also offer their clients a reduced rate of VAT at the point of sale. These include hotels, bed and breakfast guesthouses, home rental companies such as Airbnb, and camping and caravan sites.

Attractions

Entrance fees for various attractions in the tourism sector can also benefit from the new reduced rate. Attractions listed as being eligible include;

Theatres.

Circuses and fairs.

Zoos.

Museums.

Cinemas.

Concerts.

Amusement parks.

Studio or factory tours.

Botanical gardens.

Exhibitions and other cultural events.

Businesses in these sectors need to get ready

If your company works in hospitality, with accommodation, or an attraction listed above, there are steps you will need to take to make the most of these new VAT changes;

Ensure the new VAT rate is up to date on any accounting software and internal systems.

If your business also sells goods such as alcohol that fall outside the scope of the reduced rate, you will need to conduct a few extra checks. Go through your systems to make sure you have not altered the VAT rate for these products and establish with your team how you will account for the sale of goods with different amounts of vat due.

Decide whether you will pass on the savings to your customers and if you decide not to, double-check whether you are operating within the VAT rules in this regard.

If you are going to pass on these savings, update your website, menus and other documentation with your prices and be sure to let your clients know they can enjoy these discounted rates until March 2022.

5 tips for recovering VAT on your next business trip:

With the right tools, recovering significant amounts of your travel spend can be straightforward. Here are our top tips for maximizing VAT recovery without overwhelming your travel or finance manager!

1. Use a travel booking platform to streamline corporate itineraries

The more choices your travelers can access, the easier it is to find VAT-ready options, so it pays to select a platform with a large inventory. Good travel platforms enable business travelers to search airfares, rail tickets, car hire, and accommodation in one simple-to-use system, saving your teams a considerable amount of time.

2. Get VAT ready invoices

Corporate travel itineraries can generate a vast number of invoices and administration for your finance teams. Having a tool or a system in place that can collate all of your invoices into one can save significant time, freeing up your staff to focus on more crucial tasks. The best processes will also include VAT-ready invoices to send straight to the taxman with total confidence.

3. Understand what travel expenses have VAT

If you are unsure what travel expenses are VAT deductible, check out our guide to reclaiming VAT on staff expenses. An easy-to-use cheat sheet, we cover in-depth which travel expenses have VAT applied and share advice on how to reclaim these costs successfully.

4. Calculate how much VAT you can save

Tracking your potential VAT savings monthly or quarterly is a great way to ensure you don’t miss any qualifying travel expenses. If you need help with your estimations, TravelPerk has a handy VAT calculator that can simplify the process.

5. Create reports to see how much you are saving

Without a reporting system, it is practically impossible to save on your travel spend. Generating regular reports can not only help demonstrate savings to your team, but it can also identify ways you can optimize your travel budget in the future.

How to optimize your travel budget and save up to 25%

Thanks to technology, it can be easy to streamline your business travel expenditure and annual VAT return. As the world’s largest business travel platform, TravelPerk helps businesses of all shapes and sizes save money whilst keeping travelers safe and happy on the road.

With TravelPerk’s VAT solution, organizations can save up to 25% of their travel spend while reclaiming the VAT from trips in over 20 countries. Plus, with the most extensive travel inventory in the world, TravelPerk can provide business travelers with a wide range of VAT-ready accommodation options.

We help companies significantly reduce the amount of administration with our VAT-ready invoices and straightforward reporting. If you already use other apps to record expenses and handle your accounts, our solution can be integrated with ease to synchronize information across your systems seamlessly.

If you want to learn more about saving money on your corporate travel, check out our guide on optimizing your business travel spend or talk to one of our experts about how a platform like TravelPerk could help simplify your travel VAT accounting!

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UK VAT rate increase for hospitality, accommodation, and attractions

What does this VAT rate change apply to:

Hospitality industry

Hotel and Holiday accommodation

Attractions

Businesses in these sectors need to get ready

5 tips for recovering VAT on your next business trip:

1. Use a travel booking platform to streamline corporate itineraries

2. Get VAT ready invoices

3. Understand what travel expenses have VAT

4. Calculate how much VAT you can save

5. Create reports to see how much you are saving

How to optimize your travel budget and save up to 25%

Did you find this article useful?

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