Further VAT Support from the UK Chancellor in September 2020

Reduced Rate for Hospitality & Tourism

The UK Chancellor Rishi Sunak recent announcements will be welcomed by the Hospitality and Tourism sector. In the Winter Economy Plan – which effectively replaces the Annual Budget announcements that were planned for the Autumn – we find two specific items on the VAT front. Should you wish the read through the whole Winter Economy Plan you can find it here. The extension to the use of the Reduced VAT rate of 5% for the Hospitality and Tourism sector in the UK can be found at paragraph 2.7. Basically the existing use of the reduced 5% VAT rates across supplies of food and non-alcoholic drinks from restaurants, pubs, bars and cafes and similar, can carry on under the 31 March 2021. Supplies of accommodation will remain at the 5% rate as will admission to UK attractions, all as noted in the earlier VAT reliefs announced. This will be very welcome news for all types of organisations from commercial operators to our charity clients who look after a range of cultural and heritage venues.

In the large majority of cases we are seeing that this VAT rate reduction is effectively providing an extra financial subsidy to those providers as prices are maintained but less VAT is needed to pass to HMRC – which arguably spreads the cost of support more directly and immediately across the UK taxpayers – and provides an immediate benefit to those charities and businesses hardest hit by lockdown restrictions.

Paying VAT Deferred Liabilities

In the original VAT Return liability deferral scheme, which ended on the 30 June 2020, those VAT entities that had taken the deferral option would have needed to plan to repay their Deferred VAT liability by the 31 March 2021. There has been much media commentary from economists as well as Sector groups and tax payers who had used this financial safety net as to the risk that this was building up for job security in the Spring when that March 2021 date arrived and these payments would fall due. Therefore the announcement in the Winter Economy Plan at paragraph 2.12 will give comfort to many.

The government have created effectively an extended payment plan for this deferred VAT through the option to spread the VAT and indeed other tax liabilities payments - over the financial year 2021-2022. The report notes that over half a million businesses deferred VAT payments which in terms of money left in the hands of VAT registered businesses and charities created a cash injection of £30 billion into the UK economy. Rather than paying in full at the end of March 2021, businesses will be able to choose to make 11 equal instalments over 2021-22. All entities which took advantage of the original VAT deferral can use the New Payment Scheme. Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021.

It is an “opt in” scheme so please do monitor whether – come the start of 2021 – your organisation would wish to use this route. Details from HMRC are here

You can start paying back any deferred VAT now should you wish as a means to manging cashflow, you don’t have to wait but, of course, you should take a longer term view of cashflow as we go into 2021 particularly as the impact of Brexit on the nature of your trading may not “kick in” until we get into the Jan -Feb 2021 period.

Outside of this extension for payments for deferred VAT any VAT entity can approach HMRC to agree a “Time to Pay” plan for existing VAT liabilities and you can find information from HMRC on how to contact them in this regard here . We can support you in this regard.

We appreciate that VAT management at the best of economic times can be a challenge but it’s proving even more of one in the current circumstances as finance teams work remotely, VAT changes continue, Brexit approaches and just staying financially viable as a business or charity is the key priority.

Do not forget that there may be hidden VAT costs in your organisation that you could be unlocking – that’s where Centurion VAT can help:

• Are you sure you are claiming all the VAT that you are entitled to?
• Is there a VAT saving that could be identified in your activities, systems or processes?
• If you are in the middle of a challenge from HMRC is there an effective way to resolve their challenges that free you up to concentrate on the day to day management of keeping going or indeed for some of achieving further long term growth?

Centurion VAT help all types of businesses, public bodies and charities managed their VAT & Environmental Taxes effectively on routine management issues to major development projects or strategy plans when VAT or Environmental Tax gets complicated. Check our website – register there for our FREE newsbytes and for on-line VAT training events – never feel that specialist VAT or Environmental Tax is hard to find local to you – the Centurion team is just a call or an email away emailus@centurionvat.com