The Government has today (15.07.20) temporarily reduced the VAT rate to 5% (from 20%) in order to support the hospitality sector on certain good or services. This reduction will apply to food and non-alcoholic drinks supplied by restaurants, pubs, bars, cafes and to hot take-away food outlets.
The reduced rate of VAT will also apply to accommodation and admission to various attractions across the UK.
Notice of the change was given with short notice and not much time to make the changes but it has been refreshing to hear that most of the Point of Sale system providers have either explained how or updated the systems to bring the changes into some places automatically.
Some, however, still require you to make the changes yourself and if you need to do this, we advise you give the provider a call and ask them how it can be done.
Unfortunately, if you have still been charging 20% VAT on your sales today then this is still payable to HMRC until you update your systems.
The moral dilemma many businesses in the affected sectors face is whether to pass this reduction onto its customers or allow for the slight increase in selling price. It has been a difficult time for most of the businesses recently and cash generation may be a problem they need to address but on the other hand, this reduction is also partly to help encourage communities to start visiting places and kickstart the economy again.
Some of the practical issues around the changes will not only be updating the sales systems but also on printed price lists such as menus or online booking systems. The physical menus can easily be managed with a marker, stickers or temporary menus if the price is to change and hopefully, the online systems will update automatically if you are able to change the VAT rate.
If you are a pub or seller of alcoholic beverages, you will need to separate your items you sell between alcoholic and non-alcoholic. This means a spirit and a mixer will have two different VAT rates applied. If you don’t have this level of detail on the system, then our advice would be to not only make sure the VAT is correct now but also so you can start to track the components of your sales.
One positive note is that we know when this will end so we have time to plan for the impact it will have in January and arrange enough time to revisit the systems and menus – don’t be too hasty and throw your old ones out as you may be able to use them again!
More information can be found on the gov website by clicking HERE.
As always if you need to discuss this in more detail get in touch with us.