Shropshire residents looking forward to a luxury getaway or a huge family celebration now that Covid-19 restrictions have eased have been urged to plan ahead.
Matt Orange, Client Manager at Dyke Yaxley, says careful planning could mean cheaper prices thanks to a temporary VAT break for businesses in the hospitality sector.
“Since July 2020, the hospitality industry has benefitted from a temporary reduced rate of 5% VAT for supplies of some catering, accommodation and admission charges.
“But this Coronavirus business support will end on September 30, so anyone planning celebrations should take advantage of the favourable rates as soon as possible.”
Matt says between October 1, 2021, and March 31, 2022, the rate of VAT would then increase to 12.5%, with a return to the standard 20% rate from the start of April next year.
“Any businesses affected by these changes will need to decide whether to increase their prices and pass this cost on to their customers, or to absorb the additional VAT and see their margins reduced.
“This will be a difficult choice for businesses in one of the hardest Covid-hit sectors of the economy – it’s a balance between profit margins and maintaining customer good will.”
Matt says customers who were due to pay deposits before September 30 for future accommodation stays may be entitled to the lower rate of VAT.
“If the customer is planning a lavish celebration, booking early means the potential VAT savings could substantially reduce the overall cost of the event.”
Matt is also urging businesses in the hospitality sector to take professional advice to ensure they were clear on the rate of VAT they should be charging and when.
“The rules are complex, and the right advice will prevent you from over-charging customers when it comes to your VAT responsibilities.
“It’s vital that businesses know where they stand as the criteria changes throughout the year, and support is widely available as they start to navigate their way through the post-Covid world.”
Matt says businesses using the VAT flat rate scheme should also be aware that HM Revenue and Customs had published new percentages that will apply from the start of October.
Matt Orange, Client Manager