Last summer, Chancellor Rishi Sunak introduced a temporary 5% VAT rate as part of a package of measures to support the hard-hit hospitality and tourism sector. As trade slowly starts to return to normal, VAT will increase to 12.5% from 1 October before reverting to the usual 20% next April. If you’ve not already done so, you should prepare for the change now.
It’s important to account for VAT correctly to avoid errors and potential penalties. The following pointers will help you work out which rate to apply:
- Event ticket sales – Date of Sale not date of Admission determines the rate of VAT – e.g. Tickets sold before 1 October for events after this date will be subject to the reduced 5% rate.
- Booking deposits – Deposits paid before 1 October for bookings taking place after this date are subject to the reduced 5% rate. If you intend to pass on the VAT saving to guests, highlighting this could encourage early full payment and help with cashflow.
Preparing for the VAT increase
Now is the time to:
- Consider whether to increase prices to pass on the higher VAT rate
- Make sure the VAT rates in your till systems, and on price lists, invoices and receipts are correct
- Find out of your suppliers will be increasing their prices to you
- Check that third party contractors have updated their own systems and records
- Make sure the information on your website is up to date.
The change will affect every business differently but there is one thing they all have in common – getting VAT wrong can be costly.