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5% VAT: Reduced Rate For Hospitality From July 2020

A reduced 5% VAT rate on hospitality sales kicked in on 15 July 2020. The new rate applies to all cafes, coffee shops, restaurants, bakeries and similar businesses.
5% VAT: Reduced Rate For Hospitality From July 2020

VAT Cut To 5% On Most Hospitality Sales

The VAT rate on hospitality sales was cut from 20% to 5% on 15 July 2020. It will remain in place until 12 January 2021.

Most hospitality supplies are included in the reduced 5% VAT rate, including:

  • Eat-in hot and cold food/drinks
  • Eat-in hot and cold non-alcoholic beverages
  • Takeaway hot food/drinks
  • Takeaway hot non-alcoholic beverages

Some items remain subject to VAT at 20%, such as:

  • Alcohol
  • Retail products like equipment, filters, cups, etc...

And there is one important exception that remains subject to VAT at 20%:

  • Cold takeaway food/drinks that are normally subject to VAT at 20%, will remain subject to VAT at 20%
  • For example - takeaway soft drinks and confectionery stay at 20% VAT.
  • But takeaway food that is normally zero-rated - like a takeaway salad - remains at 0% VAT.

This means that VAT on a bottle of orange juice eaten-in has been cut to 5% but a bottle of orange juice to take-out is still subject to VAT at 20%.

Unfortunately, this means you will probably need to add a new tax rate to your sales system, as opposed to simply changing the tax rate from 20% to 5%.

How To Update Your POS System

This is a good time to review all of your sales to ensure you are charging VAT at the correct rate. You might find our extensive guide to VAT on hospitality useful.

How you update your system is entirely up to you.

Here's how it works for iZettle Pro and The Good Till.

Charging Reduced Rate VAT on iZettle Pro

iZettle have implemented a bulk product update feature.

Before updating your products, you'll need to add a new tax rate if you do not have a 5% rate set up already:

  1. Login to the iPad app (this doesn't work on the browser/backoffice version):
  2. Go to Settings > Configuration > Currency and Tax tab
  3. There are three possible tax rates, create one for 5%
  4. Sync the iPad app (on the main screen, all products and sales, click sync products now)

Once this is complete, you'll need to update your products. The best way to do this:

  1. Login to iZettle Pro Backoffice
  2. Click on the iZettle Pro Beta logo (bottom left corner)
  3. Go to Products > Product Library

From here you can edit each product individually or in bulk to amend the tax rate.

Charging Reduced Rate VAT on The Good Till

  1. Login to the dashboard
  2. Click the Schedule button at the top of the page
  3. Select a product (or select all on the same page)
  4. Select the schedule button at the bottom

If you make a mistake, you can only unschedule a change one at a time.

Charging Reduced Rate VAT on Eposability K-Series / iKentoo

Your products are already segregated into accounting groups, and each accounting group has a tax profile.

  1. Navigate to your accounting groups here https://console.ikentoo.com/items/groups
  2. Find the accounting group and click edit
  3. Change the tax profile to "Reduced" or "Reduced ta"

"Reduced" = for all products that were standard-rated at 20% and are now 0%

"Reduced ta" = for all products that are 5% when eat-in and 0% when takeaway

I hope you find this useful! Any questions feel free to reach out.