All alcoholic drinks are always standard rated. Alcohol-free beer and wines are similarly subject to VAT.
Tag Archives: VAT-alcohol
VAT: When is a bar a bar? – The Anglia Ruskin Students’ Union case
Latest from the courts
A student union tried to argue that a bar is not a bar. It did not go well.
In the case of The Anglia Ruskin Students’ Union the High Court considered the appellant’s application for judicial review of HMRC’s decision that “92” which was operated on the university’s campus was a bar.
The importance of this description of the venue was that if it was indeed a bar, the supplies from it would be standard rated. This is because the supplies of catering to students by eligible bodies, including universities”, are exempt from VAT, on the basis that the supplies are closely related to exempt supplies of education, however, the exemption does not cover food and drink sold in bars.
The union contended that ‘bar’ means a place that does not supply catering, or, alternatively, predominantly or mainly serves alcohol.
HMRC, predictably argued that a bar is “somewhere where one can buy and drink alcoholic and other drinks, as well as food”, and that 92 met that definition.
The court agreed with HMRC that the bar was indeed a bar and did not grant permission to appeal.
So, now we know, a bar is a bar, not a café… or anything else really.
Technical
* Student unions often provide catering alongside universities. Since March 2002, HMRC has operated a published concession extending the exemption granted to supplies of catering made by universities to student unions.
New VAT rate for hospitality
A reminder that a new VAT rate of 12.5% comes into force on 1 October 2021.
This is the first time this rate has been used and affected businesses should ensure that they are prepared.
The government announced on 8 July 2020 that it intended to legislate to apply a temporary 5% reduced rate of VAT to certain supplies relating to certain hospitality, supplies.
The reduced rate was initially introduced to last for a temporary period between 15 July 2020 and 12 January 2021. This period was subsequently extended to 31 March 2021.
The government then announced at Budget 2021 that the temporary reduced rate will be extended for a further six-month period at 5% until 30 September 2021.
A new reduced rate of 12.5% will then be introduced which will end on 31 March 2022. The scope of the relief will remain unchanged.
From 1 April 2022 the usual 20% standard rate will apply, unless there are further government concessions.
The 12.5% applies to
- hospitality: supplies in the course of catering including supplies of hot and cold food and drink to be consumed on the premises and supplies of hot takeaway food and drink to be consumed off the premises
- accommodation: the provision of hotel and holiday accommodation, pitch fees for caravan parks and tents and related facilities
- attractions: admission to attractions not covered by the cultural exemption.
The VAT Fractions
This is used to calculate the VAT element of a VAT inclusive figure.
5% = 1/21
12.5% = 1/9
20% = 1/6
Deposits
If a deposit is received, output tax will be calculated on the VAT rate in place at the time the deposit is received.
Other Issues
If a business supplies hospitality services and goods, but also makes sales not covered by the new rate, eg; alcohol, it must be able to identify the values at the different rates.
Does your accounting package have a defined 12.5% tax rate? It may be necessary to add this new rate to your software package.