Temporary 5% VAT rate and the Flat Rate Scheme
HMRC has published new guidance for VAT registered businesses in the hospitality, holiday accommodation and attractions sectors. This new guidance follows the Chancellor’s announcement in the Summer Statement of a temporary reduction in the VAT rate from 20% to 5% from 15th July 2020 until 12th January 2021.
This means that until the 12th of January 2021, VAT charged on food, accommodation and certain attractions (such as eat-in or takeaway food in restaurants, cafes and pubs, cinemas, theme parks and zoos) will be reduced to 5%.
In respect of the VAT Flat Rate Scheme, the guidance states ‘If you are a small business and use the Flat Rate Scheme to simplify your VAT calculations you should be aware that certain percentages have been reduced in line with the introduction of the temporary reduced rate of VAT’.
The relevant link that displays the Flat Rate Scheme percentages do not appear to have changed as yet but are expected to be updated shortly. The change in flat rates should be made to affected clients' accounts software.