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VAT Rate Reduction for the Food & Drink Sector - To 5%

A temporary reduction to VAT from 20% to 5% has been announced for the food and drink sector. The reduced rate of VAT is the minimum allowed by the EU and will be welcomed.
The temporary reduced rate will apply to supplies that are made between 15 July 2020 and 12 January 2021.

The government made an announcement on 8 July 2020 allowing VAT registered businesses to apply a temporary 5% reduced rate of VAT to certain supplies relating to food and drink, hotel and holiday accommodation and admissions to certain attractions. We cover the Food & Drink Sector here.

Details are limited at present, but this what we do know:

  • If you supply food and non-alcoholic beverages for consumption on your premises, for example, a restaurant, café or pub, you’re currently required to charge VAT at the standard rate of 20%. However, when you make these supplies between 15 July 2020 and 12 January 2021 you will only need to charge 5%.
  • You will also be able to charge the reduced rate of VAT on your supplies of hot takeaway food and hot takeaway non-alcoholic drinks.
  • More information about how these changes apply to your business can be found in Catering, takeaway food (VAT Notice 709/1).
  • One other measure announced by the Chancellor was the Eat Out to Help Out discount vouchers for restaurants with further guidance to come.
  • If you 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. More information can be found in VAT Flat Rate Scheme.

HMRC have stated that further guidance on the scope of this relief will be published in the coming days. If you are in the food and drink sector, do check out our services.