The temporary reduced rate for hospitality, accommodation and attractions ended on 31st March 2022. The reduced rate was set at 5% for the period from 15th July 2020 to 30th September 2021, and 12.5 % for the period from 1st October 2021 to 31st March 2022.
The main considerations are the tax point rules for the various supplies made by your client, and which VAT rate is appropriate where those supplies potentially span the change of rate.
The tax point rules are covered in VAT Notice 700: The VAT Guide, in section 14. The rules applicable to changes in the VAT Rate are covered in section 30 of the same VAT Notice.
Your client will have a mixture of single supplies of services for the touring pitches, short term holiday lets and catering, and continuous supplies of services for the long stay pitches with annual charges to the owners.
For single supplies of services, the basic tax point is when the service is completed, i.e., the holiday stay takes place, or the meal is served. An actual tax point is created when a VAT invoice is issued, or a payment (including a deposit) is received IN ADVANCE of the basic tax point. (Section 14.2.21 and 14.2.2 refers). Perhaps we should note at this point that a VAT invoice issued up to 14 days AFTER the basic tax point can also create an actual tax point, but if you have already issued a VAT invoice (for a part payment) or received a payment before the basic tax point, this will have created the tax point for the amount invoiced or received.
For continuous supplies of services, there is no “completion” tax point. As per section 14.3 the tax point is created by the issuing of a VAT invoice or the receipt of a payment, whichever happens first.
The VAT liability applicable to the transaction is usually that in force when a tax point is created. There is generally only one tax point, and that will be the basic tax point OR the actual tax point, depending on whether actual tax point falls in such a way as to override the basic tax point.
Where, however, there is a change in the rate of VAT, and as in this case HMRC does not provide any anti-forestalling measures which will dictate the tax point, section 30.7 of VAT Notice 700 provides that the supplier can adopt the rate of VAT in force at EITHER the actual tax point OR the basic tax point. In this case, with the VAT rate increasing with effect from 1st April 2022, it is likely that adopting the VAT rate applicable at an actual tax point created before the VAT rate increased/reverted to 20% will be beneficial.
Section 30.7.5 provides guidance on the issuing of credit notes if required.
If your client is using cash accounting, remember cash accounting does not, in itself, create a tax point which will affect/govern the VAT rate applied to particular transactions. The actual or basic tax point which decides the VAT rate will be created as it is in the earlier paragraphs. The later receipt of payment following a basic or actual tax point created by an invoice (not a payment) will determine only the VAT return period when that VAT is required to be brought to account.
For businesses on the flat rate scheme, the flat rate percentages revert to their pre-15th July 2020 rates from 1st April 2022. For both those using the accrual and the cash based method, the flat rate will be that in force at the tax point date, not the date on which the payment is received.
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