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Coronavirus - Temporary Reduced VAT rate for the hospitality and leisure industry - UK

  • United Kingdom
  • Coronavirus - Tax issues
  • Tax planning and consultancy
  • Consumer


In the wake of the issue of the COVID-19 “mini-budget” by Chancellor Rishi Sunak on Wednesday 8 July 2020, from 15 July 2020 until 12 January 2021, certain suppliers of hospitality, hotel / holiday accommodation and operators of leisure attractions will be required to charge value added tax (“VAT”) at the rate of 5% on certain goods and services. 

HMRC has said that these changes are being brought in as an urgent response to the coronavirus (COVID-19) pandemic to support businesses severely affected by forced closures and social distancing measures.

The temporary VAT reduction will apply to:

  • food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs;
  • hot takeaway food and hot takeaway non-alcoholic beverages;
  • sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities;  and
  • admissions to the following attractions that are not already eligible for the cultural VAT exemption (such as theatres, amusement parks, museums, cinemas and zoos – to name but a few).

This will equate to improved cash flow for these businesses who are facing, as an industry, serious financial troubles.  Arguably, some in this sector may already bear the VAT burden when setting prices so it is not necessary for all businesses to pass on the VAT reduction to consumers. It is likely that some businesses may choose to keep prices static, in order to use the reduced rate to increase the profit margin on sales, whereas others may pass on some or all of the reduction in VAT onto the customer, to increase sales.

If you would like to discuss how the reduced VAT rate impacts your business, or if you would like to understand whether you can apply it, then please get in touch.