HMRC clarifies summer holiday VAT cut

HMRC has published further guidance on the temporary VAT reduction for certain activities during the school summer holidays. The additional detail helps businesses determine which supplies qualify for the relief and, importantly, which do not. What do you need to know?

The temporary measure reduces VAT on qualifying supplies of admission to certain attractions during the summer holiday period. It was announced as part of the government’s package of measures aimed at reducing the cost of family activities over the school break.

HMRC’s latest guidance provides more detail on the types of admission that can benefit from the reduced rate and how the rules apply where attractions sell packages containing several elements. This is particularly important where the admission price includes goods or services that would normally have a different VAT treatment.

Businesses will need to consider exactly what they are supplying rather than assuming that everything sold by a qualifying attraction automatically benefits from the VAT cut. Separate charges for items outside the scope of the relief will continue to attract VAT at their normal rate.

The guidance also deals with advance bookings. The relevant VAT treatment can depend on when payment is received or a VAT invoice is issued, rather than simply the date on which the customer visits the attraction. This could affect businesses that took bookings before the temporary reduction came into effect.

With the summer holidays now underway, businesses affected by the measure should check that their accounting and point-of-sale systems are applying the correct VAT treatment. The temporary nature of the relief also means systems will need to be changed back once the concession ends.