We provide advice, consultancy and support with VAT planning, capital projects and disputes. We have a specialist in-house team with valuable expertise to help you understand complex legislation, case law and HMRC guidance.
In his Summer Statement, Chancellor Rishi Sunak announced a temporary reduction in the VAT rate across the UK. Find out further details below or contact our specialist VAT team at email@example.com for advice.
The Chancellor Rishi Sunak has announced a temporary 5% VAT rate which will come into effect from 15 July to 12 January 2021. The main areas which will be affected are:
- Sales of Food and non-alcoholic drink in restaurants, pubs, bars, cafes and similar premises;
- Hot takeaway food and non-alcoholic beverages;
- Sleeping accommodation in hotels, B&B and similar accommodation including holiday accommodation, pitch fees for caravans and tents and associated facilities; and
- Admissions to tourist attractions such as theatres, concerts, amusement parks etc.
The changes are not limited and will impact on any businesses or organisation that provide food or drink, accommodation, or are considered a tourist attraction. From 15 July 2020, a rate of 5% VAT will apply to the following income:
|Sector||Working Example||Not included (and still subject to 20% VAT)|
|Sales of food and drink||All food and non-alcoholic drinks in restaurants, pubs, cafes etc. including hot takeaway food and non-alcoholic beverages.||Alcoholic drinks|
|Hotel, B&B, Holiday Lettings, Caravan Parks||Sleeping accommodation in hotels and similar including holiday accommodation, pitch fees for caravans and tents and associated facilities.||No exemptions|
Admissions to tourist attractions including theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities.
If an admission fee is charged to view an online live performance (not a pre-recorded event), this may be eligible for the temporary reduced rate of VAT. This depends on the circumstances in each case and is subject to the fee not already being covered by the cultural exemption.
Where admission to these attractions is covered by the existing cultural exemption, the exemption will take precedence.
The temporary reduced rate does not apply to admission to sporting events.
This temporary reduced rate only applies to admission fees. However, where goods are part of the admission fee and are incidental to the main supply, the whole supply is eligible for the temporary reduced rate.
Affected businesses must start charging the reduced rate of 5% from 15 July 2020. This means all takings, supplies made and subsequent invoices issued on or after 15 July 2020 until 12 January 2021 must be charged at the 5% rate.
VAT inclusive amount
If you calculate your VAT due on gross takings, the VAT fraction to establish the new 5% rate is 1/21.
Where payment or a deposit has been received before 15 July 2020 but the goods or services are supplied after the VAT rate change, the business can choose to charge and account for VAT at the new 5% rate on goods removed or services performed on or after 15 July 2020 even though a payment has been received or a VAT invoice issued before that date.
If the business has already issued a VAT invoice showing the 20% rate of VAT, this must be corrected by issuing a credit note for the initial transaction. The rate of VAT to be used for refunds/credit notes is the one that was in force at the time of the original supply.
Supply made before rate change, invoice issued after
In cases where the supply has been made before 15 July 2020, but the invoice is issued afterwards the general tax point rules will apply, as follows.
A basic tax point is created for:
- Goods when the goods are sent or collected by the customer or made available to the customer;
- Services when the services are performed or completed.
The basic tax point is overridden if an actual tax point is created, that is:
- If before the basic tax point you issue a VAT invoice or receive payment for the goods/service – the tax point will be the date of the VAT invoice or the date when payment is received, whichever happens first.
- If you issue a VAT invoice up to 14 days after the basic tax point, then the tax point is the date the invoice is issued.
For this scenario, the new rate will apply if an invoice is issued on or after 15 July 2020, and the service or goods were supplied up to 14 days before 15 July 2020. Otherwise the standard rate of 20% will apply to the supply.
If your VAT return includes invoices issued at both the old and new rate of VAT, and is due to be submitted after the new rate is introduced you will need to account for VAT at both rates, so at 20% before 15 July 2020, and 5% thereafter as charged on your sales invoices.
Passing on the VAT savings
The reduction of the VAT rate is designed to boost the economy, encourage consumer spending and help businesses. Businesses therefore have the choice whether to cut prices and pass the discount onto the customer or retain the profits by maintaining the higher prices (i.e. there is no requirement to pass the discount in VAT onto the consumer). We recommend that businesses take advice from a commercial and reputational perspective.
Cash accounting – if using the cash accounting scheme a business accounts for VAT at the point payment is received, however the general tax point rules apply. VAT will only be due at the new rate for supplies made after 15 July 2020.
Flat rate scheme – If you are a small business and use the use the Flat Rate Scheme to simplify your VAT calculations you should be aware that certain percentages have been reduced in line with the introduction of the temporary reduced rate of VAT. Some businesses might decide that leaving the scheme will be more beneficial.
Retail scheme – The new rate will apply to takings received on or after 15 July 2020. Some businesses that use the retail scheme may need to apportion their takings and apply the standard rate and the reduced rate, where the change spans a VAT period. It will be important that the VAT rate for affected supplies is updated on till systems.
Payment on account – the rate change will not affect payments of account. However, if your business’ VAT liability is expected to decrease by 20% or more you can write to HMRC and request reduced payments.
Annual accounting – HMRC will not change any instalment unless you expect your VAT liability to decrease (or indeed increase) significantly over the course of the year. HMRC can be contacted if you consider this will be the case.
Full links to HMRC’s guidance can be found here:
All HMRC VAT Notices for the respective sectors have also been updated to reflect the changes announced:
- Catering, takeaway food (VAT Notice 709/1)
- Food products (VAT Notice 701/14)
- Hotels and holiday accommodation (VAT Notice 709/3)
- Tour Operators Margin Scheme (VAT Notice 709/5)
- Land and property (VAT Notice 742)
“Eat Out to Help Out”
A further measure “Eat Out to Help Out” was announced to encourage people to eat out. This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times, and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the entire month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount.
Businesses that wish to participate in this scheme will be required to register with HMRC. Businesses can still register for the Eat Out to Help Out Scheme if they have utilised other schemes available from the Government. Provided the business submitted its application to the relevant local authority on or before 7 July 2020, the business will be eligible for the scheme.
The Government has confirmed that business owners offering this discount will have to account for VAT on the whole value of eat-in meals, so this should be factored into businesses processing for VAT return purposes.
Full details on this scheme can be found here – https://www.gov.uk/government/publications/get-more-information-about-the-eat-out-to-help-out-scheme/get-more-information-about-the-eat-out-to-help-out-scheme
We advise on specific projects and also provide VAT audits to review your position.
For start-ups and entrepreneurs: we’ll help you pick the right time to register for VAT, whether or not you’ve reached the registration threshold
For charities: we advise on the specific tax reliefs available to your products, services and capital projects
For building preservation trusts: we provide VAT advce to support feasibility studies for the reuse of historic buildings at risk
For businesses: we’ll advise on the correct VAT treatment of your income supply and update you on the case law which influences your industry
For all: the team will advise on the numerous rates of VAT available, as well as potential reliefs
There are numerous considerations and technicalities with VAT: do you have to register for it, and should you register before you’re legally required to? Will your charity project benefit from zero-rating? Are you supplying one product, or more – and if so, which VAT rates should they attract? On top of this, VAT is an EU tax; how will it evolve should the UK leave the EU?
VAT touches on nearly every aspect of business, so our team works with colleagues across Chiene + Tait to deliver the right advice. We have over 40 years of experience dealing with a wide range of issues for SMEs, charities, farms & estates, and the public sector – such as:
- VAT registration applications;
- Land and property transactions;
- Negotiations with HMRC and Dispute Resolution;
- Partial exemption and Non Business;
- VAT Return completion and submission;
- VAT groups;
- Comprehensive reviews;
- Advice on a variety of ad-hoc queries;
- VAT recovery on capital projects.
Contact us whether you have a specific question, need general advice or are looking for an audit of what you do.
Value Added Tax is a complex area to understand and if you get it wrong the consequences can be serious. Here are some tips to help you:
- Always keep your books and records up to date. Good record keeping is essential to keep on top of your VAT. You must keep your records up to date or it will cause a lot of problems sorting them out later.
- Make sure you obtain valid VAT invoices from suppliers. You must have one of these in order to claim back the input VAT, so always check the documents you receive. Correspondingly you should issue a valid sales invoice for all your sales.
- Remember to claim VAT bad debt relief. Output VAT on customer invoices which remain unpaid may be reclaimed from HMRC. Unpaid invoices need to be noted as bad in your accounting records and six months must have passed from the payment due date, before a claim on your Return is made.
- Don’t claim VAT on entertaining clients. However, any VAT on subsistence costs incurred by staff can be recovered. You must therefore ensure that you correctly identify subsistence and entertainment and keep your receipts.
- Claim VAT on mileage claims – where employees are reimbursed for business mileage, input VAT can be claimed. Employees must submit VAT receipts for fuel along with their expense claims.
- VAT cannot be reclaimed on non-business expenses.
- File all VAT Returns on time and make payments prior to the deadlines. If you are experiencing cash flow difficulties and are struggling to pay on time, contact HMRC immediately to discuss payment terms.
- Make sure you deal with errors correctly. This will affect the penalties that you will incur from HMRC.
- Submit your VAT returns electronically. (For VAT periods starting after 1 April 2019, subject to some exceptions, all VAT-registered businesses and organisations with a taxable turnover over £85,000 must submit their VAT returns via Making Tax Digital (MTD) approved accountancy software. For advice on MTD please contact our VAT team.)
Need any help, or have any questions? Contact us at firstname.lastname@example.org.
Expert advice on this complicated and intricate area of tax legislation can save significant sums of money. The complexity means that larger projects involving tribunals and the Courts can take a significant length of time to be resolved; we have worked on some projects over a number of years before the matter is settled.
In one recent case, we saved a small local sports club tens of thousands of pounds during a dispute with HMRC over a new clubhouse – a sum that the club would have been unable to pay and could have ended it.
We saved another client’s asset worth over £100,000 following a review by HMRC.
We provided a fast assessment to a publisher to determine whether their product qualified for zero-rating.
We have worked with a religious institution to identify the implications of a refurbishment and extensions building project: as the institution is a charity, we were able to advise on ways to reduce the tax bill and make the project more affordable.
We support numerous building preservation trusts understand how VAT can impact on a project that directly supports feasibility studies for the reuse of historic buildings at risk. Click our testimonials page here for more information.
Get in touch with your question to see how we can help you.
Our specialist team has provided Heritage Trust Network members with advice for over 8 years and have extensive experience in the building preservation trust sector.
Chiene + Tait LLP offer member Trusts a free, initial ½ hour consultation on VAT, Tax and accountancy matters, following which the Trust will be provided with a written summary of the advice and a detailed quote if any follow-up work is involved.
Trusts contact Chiene + Tait at various stages of their project and queries can range from simply confirming current understanding to giving an approximate estimate on the potential VAT recovery of a project. The firm also provides advice to members on business plans, accountancy software packages and accounting practices.
- Can our Trust recover any VAT on our project and, if so, how much?
- Will our Trust have to register for VAT?
- Do I have to charge VAT on the use of the building once it is complete?
- The Heritage Lottery Fund has asked whether our funding should be
- VAT inclusive or exclusive – what shall we tell them?
- We have been told that the work in renovating our building will not be subject to VAT because it is listed. Is this correct?
Chiene + Tait LLP can address all of these questions and more during the review.
How Chiene + Tait can help
- Confirmation of the VAT treatment of the costs of a particular project and whether the project will qualify for any VAT reductions;
- Confirmation of whether VAT could be recoverable on a project and what steps the Trust would need to take in order to maximise VAT recovery;
- Feed into the options appraisal and planning to ensure VAT is properly considered, particularly in relation to funding applications;
- Advice on accountancy software packages and accounting procedures;
- Reviews of business plans;
- Consideration of income/corporation tax position and whether the Trust will benefit from any exemptions;
- Assistance with VAT registration;
- Assistance with disputes with HMRC regarding VAT registration or VAT returns.
We will provide useful case studies and further VAT information on the Heritage Trust Network website in due course, but in the meantime we would urge you to contact Chiene + Tait LLP to make use of their initial free-of-charge service if you have specific questions. Call us today on 0131 558 5800 or email email@example.com.