Businesses providing accommodation services or catering – or anyone operating in the wider hospitality sector – should be aware of the changes to VAT taking place from 1 October 2021.

In the 2021 budget, the Chancellor advised that a temporary 5% reduced rate of VAT would be extended to September 2021. This will then be replaced by a new rate of 12.5%. And that will remain in place until 31 March 2022, when it will revert to the standard 20% level.

Products and services that currently benefit from the reduced rate – and therefore affected by the October increase – include:

  • Food and non-alcoholic beverages sold for consumption on-premises (for example, in restaurants and cafés)
  • Hot takeaway food and hot takeaway non-alcoholic beverages
  • Sleeping accommodation, holiday accommodation, and pitch fees for caravan and tents
  • Admission to certain visitor attractions and events

When there is a change in VAT rates, you need to consider the impact this may have on your VAT accounting.

But watch out: it’s not always straightforward!

For example, if advance payments for accommodation (including deposits) are taken between 1 October 2021 and 31 March 2022 those payments will be subject to 12.5% VAT even if the accommodation is being booked for a period after 31 March 2022.

For informed advice and practical assistance with all kinds of rural property matters, please call Alex Orttewell or Richard Edge on 01935 852170 or email