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VAT cut kicks in for certain sectors

A temporary cut to the standard rate of VAT for businesses in the food, drink, hospitality and tourism sectors has come into force.

Chancellor Rishi Sunak used last week's economic update to announce the measure, which reduces the main rate from 20% to 5% until 12 January 2021.

Sunak said:

"This is a £4 billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere."

The VAT reduction applies on supplies of food and non-alcoholic drinks from pubs, restaurants, cafes, and similar premises.

Supplies of accommodation and admission to attractions across the UK are also covered by the measure.

Carolyn Fairbairn, director-general of the Confederation for British Industry, said:

"Revitalising demand through this targeted VAT cut will be welcomed by many businesses and help give consumers confidence to spend."

Firms can choose whether or not to pass on the reduction to consumers by lowering prices, although this is not mandatory.

Speak to us about your VAT obligations.