How hospitality businesses can prepare for VAT rate rise to 12.5% from 1 October
From 1 October, the VAT rate is to be increased to 12.5% for hospitality, holiday accommodations and attractions businesses. This will stay in place until 31 March 2022, then from 1 April affected businesses are to return to the standard rate of 20%*.
The new rate replaces the current temporarily reduced rate of 5%, introduced on 8 July 2020, which was put in place to encourage customers back to the sector following the Covid-19 lockdown.
Those affected by the change include VAT registered businesses in the hospitality or holiday accommodation sector, including cafes, restaurants, pubs and hotels, as well as attractions such as shows and theme parks.
Pauline Green, head of product compliance at QuickBooks, the leading financial management software provider, says: “For many businesses in the hospitality sector, particularly small businesses, the rate hike signals a new host of changes to be navigated.”
“Almost all businesses across the sector – everything from independent coffee shops to bed and breakfasts, and family-owned pubs to circuses – will be impacted. Businesses such as these have already been financially hit by several lockdowns in which they were forced to close for long stretches with no custom, and it is crucial that we help them to prepare for the change so they experience as little disruption as possible.”
QuickBooks has put together a checklist of the top 9 things for small hospitality businesses to consider, to help them prepare ahead of the 1 October deadline. These include:
- Making sure any changes to prices and systems are communicated to all the staff who will be using them.
- Checking prices and VAT rates are listed online within website content
- If admission feesare changing, checking where they are displayed
- When it comes to ticket prices, making changes that might be needed to both printed and e-tickets
- If pitch fees are changing, checking where they are displayed
- Checking with the Electronic Point of Sale (EPOS) system provider that the new rate will be available in time and what needs to be done to activate it
- If bridging software or other applicationsare used within the bookkeeping and accounting process, checking that they’ve been updated with the new rate
- For restaurants and other venues with catering,making sure menus and price lists are updated - are prices changing and is the correct VAT rate and amount displayed to customers?
- For accommodation businesses, considering accommodation packages - are there third-party vendors or partners who need to be made aware of any changes?
Financial management software such as QuickBooks can help small businesses stay on top of VAT by automating the process. The 5% reduced rate is already included in QuickBooks, and it will be possible to activate the new 12.5% VAT code from 20 September 2021.