Following the Summer ‘mini Budget’ there have been changes to VAT rates for hospitality, holiday accommodation and leisure businesses.
From 15 July 2020 to 12 January 2021, the 5% rate of VAT applies to certain supplies made in the sector. https://www.alliotts.com/blog/vat-cut-for-hospitality-and-leisure-it-s-not-clear-cut/
A VAT registered business can recover VAT on its business expenses but it can only reclaim VAT on a valid VAT invoice. This is a legal document and must include specific information for VAT recovery. Therefore, businesses must check their invoices to make sure that all the required information is included and the correct VAT has been charged by the supplier.
The temporary VAT cut may make it harder for suppliers to charge VAT correctly as the new temporary VAT rate does not apply to everything in a catering business.
For example, in a take-away business, the reduced 5% rate only applies to hot food, hot takeaway and non-alcoholic beverages. If a business receives any invoices related to hospitality or accommodation (for example, staff entertainment etc), the business must make sure that 5% or 20% VAT has been charged correctly which can be recovered under normal VAT recovery rules.
If incorrect VAT has been charged by the supplier, the invoice will not be a valid VAT invoice and the business customer cannot use the invoice to reclaim VAT. The only way to recover the correct amount of VAT is to contact the supplier and ask them to re-issue the invoice with the appropriate rates applied.
We know things are not straight forward in VAT and these small changes can make them even more complicated.
If you have any questions, please get in touch with our VAT team and we will be happy to help you with any queries.