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New VAT rate of 12.5% for the hospitality industry from October 2021

24 August 2021 / Neil Warren
Issue: 4806 / Categories: Comment & Analysis
Fourth rate

Key points

  • There will be four rates of VAT between October 2021 and March 2022.
  • The absence of anti-forestalling legislation is intended to help the hospitality industry with cash flow.
  • Advance planning can save VAT for a hospitality business that prices its services on a VAT inclusive basis.
  • Businesses that left the flat rate scheme in July 2020 might want to rejoin in October or April next year.

Who would have believed it? From 1 October 2021 to 31 March 2022 we will have four rates of VAT to deal with for the first time since 1979 because of the temporary rate of 12.5% that will apply to the hospitality industry. This is very different to the two rates of 0% and 15% we had when I first started working with the tax nearly 40 years ago. So much for tax simplification! Is there a chance that we could soon...

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