The UK Chancellor, Rishi Sunik, has just announced his 2021 budget for the UK. Amongst many tax measures announced was an extension to the current VAT rate reduction for the tourism and hospitality sector which was due to end on 31 March 2021.
Businesses in the tourism and hospitality sector are currently able to apply the reduced 5% VAT rate to certain supplies up until 31 March 2021. However, following the announcement this deadline will be extended to 30 September 2021, after which time a new VAT rate of 12.5% will be applied up until 31 March 2022.
The Chancellor has also announced that the VAT registration threshold is to remain at £85,000 up until at least 31 March 2024.
Finally, it has also been announced that the Government is to reform the penalty regime for the late submission of VAT returns and late payment of VAT. The new regime will commence for VAT returns starting on or after 1 April 2022 and make it fairer and more consistent. It will also align the interest on over/under paid VAT with other tax regimes to bring in a more harmonised approach.