Today (15th July 20), the temporary VAT reduction for the hospitality sector goes live.
Most businesses operating within the hospitality sector including pubs, restaurants and hotels will now pay only 5% VAT on sales, down 15% on the standard rate of Value Added Tax, currently chargeable at 20%.
Whilst a more straightforward exercise for those operating on the standard VAT schemes, albeit still warranting some additional administration in the early stages, businesses on the flat rate scheme have been eagerly awaiting the release of new VAT rates.
This morning, HMRC has released the updated Flat Rate percentages with generous reductions across the board none more so than for Hotel and accommodation businesses whose VAT rate percentage reduces from 10.5% to zero.
This will be a welcome announcement for the most hard hit businesses during the COVID-19 crisis but it will cause some additional record keeping for those mid way through their VAT quarter.
Our advice to businesses on the flat rate scheme is not to amend your accounting software settings, rather to keep additional records such as a spreadsheet or ledger to record sales made on the new flat rate percentage. At the end of the VAT quarter a simple calculation can be completed to determine the VAT due and an adjustment can then be made without affecting the integrity of your bookkeeping records.
We’ll publish more guidance on these calculations in the coming days.