Increases in VAT for Some Businesses
Due to the pandemic businesses in the hospitality business were effected by a cut in flat rate scheme percentages by the government. However as of 1st October 2021 these rates have now been increased.
A flat rate scheme is used by a business in regards to VAT, this means it charges the output tax at a standard rate but accounts for it at a rate specified by HMRC. This therefore means that they can keep the difference but they wouldn’t be able to claim input tax on the majority of their purchases. To stop businesses from unfairly benefitting from the Flat Rate Scheme there are rules for traders that don’t incur much VAT.
Towards the start of the pandemic the Flat Rate Scheme was cut by the government for accommodation services such as hotels, catering services and pubs. These cuts were temporary and to be raised. Therefore as of the 1st October 2021 the rates have increased but not however gone back to their original rate.
The rates are now as follows:
- Accommodation businesses have increased from 0% to 5.5%
- Pubs have increased from 1% to 4%
- Catering services including both takeaways and restaurants have increased from 4.5% to 8.5%
These increased rates will be in place until 31 March 2022, it is expected that after this they will return to the original levels before the pandemic.
For more information get in touch with Cheylesmore Chartered Accountants today.