The temporary reduced VAT rate increased from 5% to 12.5% from 1 October 2021.
Due to the pandemic, on 8 July 2020, the government announced a temporary 5% reduced rate of VAT for certain supplies relating to hospitality,hotel and holiday accommodation and admission to certain attractions.
The reduced rate was initially introduced for a temporary period between 15 July 2020 and 12 January 2021 and was subsequently extended to 31 March 2021.
In the Budget 2021, the Chancellor announced that the 5% reduced rate would be extended again until 30 September 2021 and further that from 1 October 2021 until 31 March 2022, the temporary reduced rate of 5% VAT will change to the new reduced rate of VAT of 12.5%.
The normal standard rate of 20% will now return on 1 April 2022.
Restaurants warn prices will rise
Trade bodies,including UK Hospitality, the British Beer and Pub Association, and Tourism Alliance have called on the government to make the 12.5% VAT rate permanent, rather than increasing the rate again in the spring, to safeguard the future of businesses and protect jobs.
In a joint statement, they said returning VAT back to 20% would have serious consequences, with six in 10 businesses noting in a survey that it would “likely lead to cutbacks and job losses”.
Kate Nicholls, chief executive of UK Hospitality, said keeping the VAT rate at 12.5% would be the most effective move by the government to secure a more rapid recovery and rebuild resilience faster.
But a Treasury spokesman said the government had always been clear that lower VAT rates were a temporary measure to support businesses as they recover from the pandemic.