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Last updated: 3 Mar 2021
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Spring Budget 2021: 5% VAT for hospitality and tourism extended and new 12.5% rate announced

The Chancellor has announced the extension of the temporary 5% VAT rate for admission to attractions, holiday accommodation and sales of food and non-alcoholic drinks, until 30 September 2021. A new reduced rate of 12.5% will then be introduced which will end on 31 March 2022. 


The temporary VAT reduction for admission to attractions apples to commercial bodies, and may be relevant to some charity venues that charge VAT. However, if a venue is not for profit and admission is currently exempt under the cultural exemption, the exemption will take precedence and admission charges will not qualify for either reduced rate.

HMRC’s guidance states that the reduced rates will apply to admission charges received from shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions, and other cultural events and attractions such as planetariums, botanical gardens, studio tours and factory tours. However, they do not apply to admission to sporting events.

Tickets sold in advance

Ordinarily the basic tax point for a supply of services is the date the service is ‘performed’.

However, the basic tax point is over ridden by an ‘actual’ tax point (receipt of payment or issue of a VAT invoice) where that occurs before the basic tax point. There are special rules for ‘supplies spanning the change in the VAT rate’ which allow that where payment is received or a VAT invoice issued before the date of the change, but the services are performed on or after that date, VAT can be accounted for using the basic tax point, which would be the rate due after the rate change. 

HMRC’s view however, (explicit in previous guidance issued when the VAT rate changed in 2008 and 2011) is that the sale of tickets is the sale of a ‘right to attend’, and the right is granted (‘performed’) when the ticket is sold, not when the event itself takes place. Therefore, if a customer purchased a ticket in September 2021 for a concert in April 2022, the tax point is the earlier of those dates and VAT is due at 5%.

What should you do?

For all tickets sold before 30 September 2021 for events or performances that will take place afterwards, you should account for VAT at 5%. This would also apply to annual passes. Thereafter the new 12.5% rate will apply until March 2022.

Mixed supplies

HMRC state that where goods are part of the admission fee and are incidental to the main supply, the whole supply is eligible for the temporary reduced rate. The example given is a brewery tour, which includes incidental food and drink, i.e. where the main purpose of the tour does not include food and drink. This is always a tricky area in VAT and its likely there may be some grey areas. It has to be hoped that HMRC will not be too dogmatic about any claims that arise.

Membership or admission?

Many museums, galleries and cultural venues sell membership packages, which offer unlimited annual admission along with a number of other benefits, such as discounts and invitations to member events. It could be argued that where the admission is the main benefit for the customer, the reduced rate should apply. 

What should you do?

Before claiming a reduced rate for membership packages, we would strongly recommend that you discuss your circumstances with one of our VAT experts, as it remains to be seen whether HMRC would accept this, because “membership” is normally regarded by them as a separately identifiable supply in its own right. The extent and value of the additional benefits may be relevant.

Admission and online events

Whether the admissions relief is a significant benefit to the sector will depend on the ability of venues (particularly theatres and concert venues), to re-open buildings for live audiences on a viable basis in adherence with government guidelines issued for COVID-19 in February 2021. Online events have been the main way for venues to continue to operate during the crisis without a live audience.  

Selling access to watch an event online is subject to different VAT rules from selling physical admission to your venue. When selling access to consumers to online content, you need to consider whether what is being supplied is an ‘electronically supplied service’ (ESS). This is important because unlike admission to a physical venue, an ESS is treated as liable to VAT in the customer’s country, not the country of the supplier/venue.  

What is an Electronic Supply of Services?

An ESS is characterised by being essentially access to online content (e.g. a video recording of a concert/performance/event) delivered without human intervention, where the consumer is in control of the timing of delivery and obtains immediate access to the content after payment. As such, supplies of ESS to UK consumers are liable to 20% VAT, not the reduced rates, and supplies to EU consumers are liable to VAT at the rate applicable in the customer’s country.  

Where however the internet is being used as a means for an audience to watch a performance which is happening live, as they watch/listen in real time (not a pre-recorded event), at a scheduled performance time, then HMRC’s comments on ‘live online performances’ in their guidance ‘VAT on admission charges to attractions’, suggests that this would not be regarded as an ESS and the temporary 5% and 12.5% admission rates in the UK could apply to all income, unless the performance was covered by the cultural exemption. This would also be subject to the cultural venue being the direct supplier – rather than an online platform. 

Where you are selling the initial ticket for the live performance, which also gives the person a right to “watch again”, that could be seen as a mixed supply but it may be possible to argue that later watches are ancillary. In this case, you should seek specific VAT advice tailored to your circumstances.

Liability to register in the EU - ESS  

Until 1 January 2021, if the annual value of your total cross-border ESS to consumers in the EU was below £8,818 per year, then the place of supply was the UK and UK VAT was due. Over that threshold, the place of supply was where the consumer was located and in that case, the UK supplier was required to register in each EU member state where customers were based, or register and account for EU VAT on supplies to EU consumers under the VAT Mini One Stop Shop (‘MOSS’) in the UK.  

When the UK left the EU on 1 January 2021 it lost the benefit of the £8818 threshold so that any ESS sale to an EU consumer would render the supplier liable to register in the EU under MOSS for non EU suppliers. UK cultural businesses supplying pre-recorded events therefore need to be aware of the VAT registration requirements in the EU. These are changing on 1 July 2021 when the EU introduces a new scheme for registration called the One Stop Shop. Click here for more information. 




Hospitality refers to the food and non-alcoholic drinks sold on your premises – e.g. in cafes, restaurants or bars; and also takeaway hot food and hot non-alcoholic drinks. The temporary VAT reduced rates cover:

  • All on-site food and drink (catering) except for alcoholic drinks, which remain at 20%
  • Take away sales of hot food and hot non-alcoholic drink
  • Food and non-alcoholic drinks sold as part of any catered events such as weddings and conferences

There are some complexities if you have cold takeaway sales, because certain cold takeaway foods are zero-rated (such as salads and sandwiches) and some are standard rated (such as confectionery and crisps). This will lead to the odd consequence that a packet of crisps sold at a diner in your café will be at the appropriate reduced rate but one taken off-premises will be liable to 20%.

What should you do?

Your till systems will need to be coded with three rates of VAT (and they will be different after 30 September) and be able to distinguish takeaway from eat-in. If you are using a contract caterer who supplies food to customer as principal in your venue, any commission received from the caterer will still be standard rated at 20%.




The temporary reduced rate for accommodation includes sleeping accommodation (including bathrooms, living rooms and suites, in a hotel, inn, boarding house, or similar establishment), accommodation used for the supply of catering (such as weddings and dinners), rooms provided with sleeping accommodation and lettings of holiday accommodation (such as cottages and caravan and camp sites). 


If you receive deposits for accommodation or catering (e.g. for a wedding) before 30 September 2021, where the stay or the catering will be provided during the 12. 5% rate reduction period (1 October 2021 – 31 March 2022) the change of rate rules allow you to treat the deposit as 5% rated. The HMRC guidance on change of rate is in VAT Guide 700 Section 30.

Other consequences of the VAT rate changes to consider

As with the introduction of the 5% rate when the 12.5 % rate comes in there will be administrative costs in adapting prices, tills and accounting systems to reflect the temporary change and then reverting back to the standard rate in April 2022, including:

  • Changes to EPOS till systems, online booking engines and back-office functions need to be made on 1 October 2021 and 1 April 2022 , to ensure that the correct amount of VAT is charged to customers and declared to HMRC
  • Changes to information on sales invoices/VAT till receipts
  • Pricing decisions - you will need to decide whether to continue to  pass the reduction on to the consumer or hold  prices and keep the benefits – there is no legal obligation to pass it on
  • The administration involved in changing to 12.5% on 1 October 2021 and  reverting back to 20% on 1April 2022 J and how this may impact VAT reporting for return periods that may have 5%, 12.5%  and 20% rate supplies

The practical systems changes required lend themselves well to the Making Tax Digital (MTD) for VAT considerations where digital links will be required from 1 April 2021 between EPOS systems and accounting packages. 

What should you do?

In light of COVID-19 along with MTD and a VAT rate change, now is a good time for the hospitality sector to prioritise VAT, to ensure both compliance and maximising VAT efficiency at a time when cost savings are particularly important.

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