With many farms now operating as diversified businesses, the reduction of the VAT rate for tourism and hospitality sectors will have been welcomed by much of the farming community who offer holiday accommodation.
The lower 5% rate came to an end on 30th September, however, in order to help businesses transition to the standard 20% rate, the UK Government announced a new 12.5% rate which will apply for the six months from 1st October 2021 to 31st March 2022. From 1st April 2022 the 20% standard rate of VAT will be reinstated.
As a reminder, the reduced rates apply to overnight accommodation including camp sites and holiday cottages as well and hotels and B&B’s. They also apply to some food and drink sales and admission to tourist attractions.
For those using the Flat Rate Scheme for VAT, new percentages have been introduced by HMRC to cover the period 1st October 2021 to 31st March 2022.
HMRC’s point of supply rules mean you may declare your VAT on a receipts basis, where VAT is accounted for at the time of payment. This would mean that payments received before 31st March 2022 would be chargeable at the lower rate of VAT even if the stay occurs after 1st April 2022.
It may be worth considering increasing advertising or offering incentives to pass on part of the VAT saving to your guests. This may help to bring forward payments, in order to take advantage of the lower VAT rate, prior to April 2022. This could be a great opportunity to help with cashflow in the winter months.
For further information on these matters, or to discuss in more detail, please contact Marie Gilmour.
Marie Gilmour
marie.gilmour@renniewelch.co.uk
Thank you for reading this article. To receive more similar information, guidance on other areas of interest, or to arrange a follow up, please record your details here.