VAT rate change for the hospitality sector 

The VAT rate for the tourism and hospitality sector was temporarily reduced from 13.5% to 9% as a result of the COVID-19 pandemic. While the rate decrease was first introduced for the period 1 November 2020 to 31 December 2021, a number of extensions were granted with the most recent extension to 31 August 2023.

When does the change come into force?

With effect from 1 September 2023 the 9% rate will no longer apply to the certain supplies applicable to the tourism and hospitality sector.  The 13.5% rate will be reinstated with effect from this date. 

What types of supplies are impacted?

The types of supplies of goods and services impacted by this specific VAT increase include supplies of; certain food and beverages in restaurants, cafes and take-aways; admissions to certain attractions including cinemas, museums and exhibitions; the provision of hotel, guesthouse and similar accommodation; and hairdressing services.
Supplies of certain printed matter including magazines and periodicals and the provision of sporting facilities by profit making bodies, which also currently fall within the scope of the 9% rate of VAT, are not impacted by this change, nor are any other supplies of goods or services.

Practical matters for businesses to consider

With any change in VAT rates, businesses should be mindful of the impact on their pricing, business operations and ERP systems.

• Businesses will need to consider the impact of the VAT rate change on their pricing. As many of the goods and services affected are of those typically supplied to private individuals/non business customers, the VAT amount included in the price will be a net cost to many customers.
• Where applicable business will need to ensure invoices are issued at the correct rate (both sales and purchase invoices).
• Where credit notes are issued, the VAT rate applicable to the credit note should be the VAT rate applicable at the time the original invoice was raised.  As a result, business systems will need to maintain the ability to issue a credit note at 9%.
• Where advance payments are made and a business operates under the invoice basis of VAT accounting, ensure the VAT rate noted on the invoice is the rate applicable at the earlier of the time the invoice is issued or ought to have been issued.

Should you have any queries in respect of the above or the implications for your business, please contact;