To those of you in the hospitality and tourism sector, you have been enjoying a reduced rate of VAT (5%) since 12 July 2020. This reduced rate applies to most supplies made by hotels, tourist attractions, members’ clubs and most places that host events. It also applies to the food and drink served in those premises, hot takeaway food and drink, but not alcoholic drinks.

As you may be aware, this 5% VAT rate will increase to 12.5% on 1 October 2021, to apply until 31 March 2022. This rate rise provides you with an opportunity to promote advance payment for events, hotel rooms and even meals.

Any advance payments, or non-returned deposits, must carry VAT at the rate applicable when the payment is taken.

So for example, if you were hosting a fund-raising dinner in October at £180 per head (including VAT), you could offer a £12 discount for those who pay in full for their tickets before 1 October.

The same principle applies to Christmas events booked in advance. If you are planning to offer party events or hotel rooms over the winter holiday, get your advertising campaigns up and running now with a discount option for early booking.

If your business is in the hospitality or tourism sector and you would like more advice on this matter, talk to our tax team.