Can I claim back VAT on the staycation I've already booked for August?
The tax that you pay in restaurants, hotels and attractions will be cut from 20pc to 5pc and those who have already purchased tickets or paid for accommodation may be able to get that money back.
Rishi Sunak, the Chancellor, announced a six-month cut in VAT in a bid to boost confidence in the hospitality and leisure sector.
All VAT on food, accommodation and attractions will be charged at a quarter of its usual rate from next Wednesday until January 12.
During the mini-Budget this week, Mr Sunak said: "This is a £4bn catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere – all helping to protect 2.4 million jobs."
The tax cut will automatically come into effect for anyone making a new purchase. However, many will have already booked hotels or attractions and will have paid the higher rate of tax.
Can you claim back the tax you overpaid?
Technically, yes. Businesses can use a special “change of rate” provision that allows them to argue that the point at which tax is charged is when the service is performed, said Alan Pearce, of tax firm Blick Rothenberg.
The basic tax point is when you receive the service, rather than when payment is made or an invoice is issued.
This means that if you booked a British holiday for next month and have already paid for the accommodation or bought tickets for any attractions, you can ask the businesses to refund you the excess tax you were charged.
It is for the supplier to refund or credit the VAT difference to the customer and elect the tax point, Mr Pearce said.
HM Revenue & Customs warned that an important feature of the special change of rate rules is that they are optional and adoption is entirely at the discretion of the supplier. This means that a customer cannot insist that a supplier uses it.
However, in practice most suppliers whose customers are not VAT registered will use the arrangements if it results in the customer having to pay less VAT.
Mr Pearce said it would not be unreasonable for businesses to keep some of the savings from the VAT cut. The Government's aim was to encourage people to spend more in restaurants, book hotels and buy tickets to events for when they re-open. It is unclear whether the consumer or the business will be the beneficiary of the VAT rate cut as it will rely on the businesses passing on the tax savings to the consumer by lowering their prices.
He said: "A small saving for each individual consumer may not have a major impact on buying habits, but for the business, it could add up to significant tax saving which would help plug the losses suffered during lockdown. Who could blame them if they didn’t pass on the full effect of the VAT cut."
The Chancellor said the reduced VAT rate will apply to eat-in or hot takeaway food from restaurants, cafés and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, as well as cinemas, theme parks and zoos.
