It is not very often that VAT makes the Budget speech itself, but I make this at least two Budgets in a row now! Today's Budget speech brought us the news that the temporary reduced rate for the tourism and hospitality sector will be extended, and that the standard rate of VAT will remain frozen throughout this Parliament. VAT-wise, we usually see details of any other changes in the fine print, and there is no exception here as a few other VAT measures have been announced.
We were however hoping that today's "fine print" would bring us further clarity on how the TOMS rules will work for businesses selling UK travel going forward and I thought I was finally going to be bringing you some confirmation on the outstanding UK TOMS issues going forward. Alas, this does not appear to have yet materialised, meaning we may have to continue looking into our crystal balls for a while longer. Interestingly (well, perhaps for me only), TOMS did make it into the red book, in the form of the Government's cost figures for the effect of zero rating the TOMS margin for EU travel going forward, which the Government estimates at £105m per year by 2025-26.
I have set out below the main VAT measures in this year's budget, and will update this once we have further news on TOMS.
Extension to the temporary reduced rate of VAT of 5% until 30 September 2021 and a 12.5% rate for the 6 months after
In the 2020 Summer Economic statement, a temporary reduced rate of VAT was introduced for supplies of tourist accommodation, catering and admission in the period 15 July to 12 January. This was extended to 31 March 2021, and is now extended to 30 September 2021. Hopefully this will mean that those benefitting from the reduced rate will be able to take advantage of it throughout the summer months. At the end of this period, there will remain a reduced rate in place for the next six month to 31 March 2022, but this will be at 12.5%.