UK VAT has changed from 20% to 5% for hospitality, holiday accommodation and attractions. This change came into effect on Wednesday 15 July 2020 and will run through until 31 March 2021 (originally 12 January 2021 but extended on 24 September 2020).

What's changing?

To help businesses in the hospitality, holiday accomodation and attractions sectors, the reduced rate of VAT (5%) will apply to:

  • Supplies of food and non-alcoholic drinks for consumption on premises from restaurants, pubs, bars, cafes and similar premises in the UK.

  • Supplies of hot takeaway food and hot takeaway non-alcoholic drinks.

  • Supplies of hotel and holiday accommodation and admission to certain attractions in the UK.

Full details can be found here HMRC Guidance.

What to know/do in AccountsPrep if your business makes such supplies

As this reduced rate is temporary and not applicable to all transactions, we recommend the use of a new custom VAT code, to be applied as appropriate. This will make it simpler to identify transactions you're entering during this temporary reduced VAT rate period for reconciliation and anlysis purposes.

For AccountsPrep companies set up with a UK template on or after Wednesday 15 July 2020, this new tax code will already be available for you to use in that template's tax codes ("Temporary Reduced VAT Rate").

For AccountsPrep companies that were already set up with UK templates before Wednesday 15 July 2020, you will need to create this new tax code yourself by going to Settings -> Tax Codes and "Add Tax Code":

Your new tax code is now ready to use for transactions dated from 15 July 2020.

If you also use AccountsPrep's Default Tax Codes per Nominal Account feature, you may also want to review and update these settings.

For guidance on what the new UK reduced rate means for AutoEntry in general, please refer to AutoEntry and the UK VAT rate changes.

This article provides general rather than specific guidance to assist all of our customers. We always do our best to make sure that the information is correct but as it's general guidance, no guarantees can be made concerning its suitability for your particular needs. The information is valid at the time of publishing and is provided without any warranty of any kind, express or implied. You should take professional advice if you require specific guidance on your individual circumstances, for example to ensure that the results obtained from using our software comply with statutory or regulatory requirements. For VAT, customs and excise and duties enquiries you should call the HM Revenue and Customs (HMRC) National Advice Service Helpline on 0300 200 3700, contact your local HMRC office or visit their website at no event will we be liable to you for any direct, indirect, consequential or incidental loss or damage arising out of or in connection with your use of the information provided.

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