Coronavirus VAT measures extended

The Chancellor’s statement on the Government’s Winter Economy Plan, delivered in the House of Commons on Thursday 24 September 2020, included two important changes to VAT easements currently in place to help businesses negatively affected by coronavirus.

Temporary reduced VAT rate for hospitality and leisure sectors

The targeted temporary VAT cut for supplies of hospitality, hotel accommodation and admission to attractions will be extended to the end of March 2021.

The measure currently allows a wide range of supplies, which are normally subject to VAT at the standard rate of 20 per cent, to be eligible for the reduced VAT rate of 5 per cent. Instead of ending on 12 January 2021, the reduced rate will now be in place until 31 March 2021.

Read our article on the temporary reduced rate of VAT for leisure and hospitality for more information.

Extra time offered to pay back deferred VAT

VAT registered businesses who took advantage of the Government’s VAT deferral scheme will no longer have to pay back the tax in a lump sum by 31 March 2021.

The original VAT deferral scheme permitted organisations to settle the VAT payable on their VAT return with a due date between 20 March and 30 June 2020 by 31 March 2021. The Government has now announced the New Payment Scheme under which this VAT can be repaid by making 11 smaller interest-free payments during the 2021-22 financial year.

Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021. As coronavirus restrictions look set to continue throughout the winter, these extensions will be welcomed by businesses who are still unable to trade at full capacity.

Our VAT team has worked with organisations to offer a variety of other cashflow improvements. Read our article on the deferral of VAT payments due to coronavirus for more information.

For more information, please contact

Philip Munn Philip Munn

Partner