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The VAT on a sandwich and a beer out will be a lot more complicated for the next six months.

VAT hospitality rate cut: Chaos on the menu


On Wednesday the Chancellor announced a temporary 15% VAT cut for the tourism and hospitality sector from 15 July to 12 January, but Neil Warren says more detail is needed to avoid potential trouble ahead.

9th Jul 2020
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When I heard the Chancellor’s announcement about the temporary VAT cut from 20% to 5% for food and drink sold by pubs and the like, I wrongly assumed that it would include all food and drinks sales to make life easy.

But I then had a circular email from HMRC Business Help containing the two key words: “excluding alcohol”. What does this mean in practical terms?

Example: Fred’s takeaway snack

Fred goes into Jim’s licensed café on 15 July for a takeaway snack that includes a cheese and tomato sandwich, a bottle of beer and a café latte. He asks Jim for a VAT receipt so that he can claim input tax as he is away from home on business. The sandwich is zero-rated as cold takeaway food; the café latte benefits from the temporary VAT cut to 5%; the beer is excluded as an alcoholic product, so still subject to 20% VAT. Jim will either need an efficient till system to deal with three VAT rates on a single order or be good at maths if he issues a hand-written VAT receipt.

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Replies (7)

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By philaccountant
09th Jul 2020 17:08

Has it been confirmed that there is no adjustment to the Flat Rate Scheme for businesses that would be affected by this temporary tax cut? In the past, changes to the standard rate of VAT have meant adjustments to the FRS percentage a business would pay.

Would seem foolish for the government to potentially trigger thousands of businesses flooding out of the FRS for 12 months, only to rejoin next year, when a tweaking of the FRS rate would likely stave off a huge amount of bureaucracy.

I asked the HMRC webchat and they told me more detail would be announced next week but nothing specific to the FRS..

Thanks (0)
By Paul Crowley
09th Jul 2020 17:21

Much appreciated.
Concise and to the point: which is really, who knows the rules until the rules are made.
This is enough to kill several existing threads on any answers.

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By wasting asset
09th Jul 2020 18:36

If I buy a gin and tonic, is that one supply at 20%, but a gin, with a separate bottle of tonic, is that two supplies, one at 20% the other at 5%?

Thanks (2)
Replying to wasting asset:
By Constantly Confused
10th Jul 2020 08:03

wasting asset wrote:

If I buy a gin and tonic, is that one supply at 20%, but a gin, with a separate bottle of tonic, is that two supplies, one at 20% the other at 5%?

Yep, that's my understanding and seems to be supported by 701/14, specifically:

3.7.1 Alcoholic beverages

You must standard rate all your supplies of drinks containing alcohol.

It looks like if it has alcohol in it, it's an alcoholic beverage. That seems logical, as the alcohol will be a minor part by volume, but will presumably represent the vast majority of the price of the drink.

So if you want to save yourself a few pence, order your next mixer separate from your alcohol ;)

Thanks (4)
Replying to Constantly Confused:
the sea otter
By memyself-eye
10th Jul 2020 09:38

Aaahhh: so if I order a 'lager top' (90% lager and 10% lemonade) I should order them separately! But then I hear you cry: 'short measure' call trading standards.

I warrant some nerd will try to do exactly that.

ps. I don't drink lager - it's the devil's wee.

Thanks (1)
By fawltybasil2575
09th Jul 2020 23:57

The Flat Rates for businesses in the “tourism and hospitality sector” are indeed in the course of being amended (imminently)
- no doubt only on a temporary basis for the period of nearly 6 months to 12 January 2021.

Unless those temporary revised rates are badly calculated, I would surmise that approx. 90%-95% of FRS businesses will promptly decide not to withdraw from FRS on 15 July 2020.

Of the remaining (say) 5%-10%, those businesses should (albeit it is unlikely that they all will) “do the maths” to assess whether the benefit of withdrawal from FRS (in that 6 months) is greater or less than the loss which will arise from being outside FRS in the NEXT approx. 6 months, ie from 13 January 2021 to 14 July 2021 (ie in view of the rule which prevents rejoining FRS, after withdrawal, for 12 months).


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Replying to fawltybasil2575:
By Paul Crowley
11th Jul 2020 00:20

I was going to say, joy do not have any. Then remembered the chip shop.

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