VAT increase for some businesses
At the start of the pandemic, the government cut the flat rate scheme percentages for businesses in the hospitality industry. As of 1 October 2021, these rates have increased. Who is affected, and why isn’t it the end of the story just yet?
In broad terms, a business using the flat rate scheme (FRS) charges output tax at the standard rate, but only accounts for it to HMRC at a specified FRS percentage - keeping the difference. But the snag is that they can’t claim input tax on most of their purchases. There are also rules to prevent traders that don’t incur much VAT from benefiting unfairly from the FRS.
Early on in the pandemic the government cut the FRS percentages for accommodation businesses, e.g. hotels, pubs and catering services. However, these cuts were temporary. As of 1 October 2021, each of the three rates has increased, albeit not back to their original level as yet. The rates are now as follows (previous figure in brackets):
- Accommodation businesses 5.5% (0%)
- Pubs 4% (1%)
- Catering services including restaurants and takeaways 8.5% (4.5%).
These percentage rates will apply until 31 March 2022, when it is expected that they will return to their pre-pandemic levels of 10.5%, 6.5% and 12.5% respectively.
Related Topics
-
Timetable for agent multi-factor authentication rollout published
HMRC has published further details of its plans to introduce multi-factor authentication (MFA) for tax agents. The rollout is intended to strengthen security across HMRC's online services and will be introduced in stages over the coming months. What do you need to know?
-
HMRC clarifies treatment of averaging relief under MTD IT
HMRC has updated its guidance to explain how averaging relief claims will operate under Making Tax Digital for Income Tax (MTD IT). The clarification addresses concerns about how farmers and creators will claim relief once quarterly reporting becomes mandatory. What has changed?
-
VAT cut for children's holiday activities over summer
The government has announced a temporary reduction in the rate of VAT applying to certain children's holiday activity programmes during the summer holidays. The measure is intended to help families with childcare costs during the school break. What has changed?
This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.