5% hospitality VAT rate. Getting the reclamation right!

5% hospitality VAT rate. Getting the reclamation right!

By Lewis Hughes
28 July 2020

On the 15th July, Chancellor Rishi Sunak cut VAT on hospitality and tourism from 20% to 5%.

Why has this rate been changed?

Hospitality and tourism have been hit hard by the coronavirus pandemic and this reduction is intended to boost these sectors.

The VAT rate cut means organisations can cut prices for their customers, encouraging them to spend, but organisations aren't obliged to pass on the VAT cut to customers. At the end of the year though, these organisations will have to pay less tax to the Government and perhaps offset some of the income lost during lockdown.

The reduced 5% VAT rate applies in the following areas:

  • Food and non-alcoholic drinks which are sold to eat on the premises of places such as restaurants, cafés and pubs, as well as hot takeaway food and non-alcoholic drinks.
  • Holiday sleeping accommodation, including hotels and pitch fees for caravans and tents.
  • Admission to some attractions, such as theatres, zoos, amusement parks, cinemas, museums and more.

How does this affect expenses?

Claiming back the correct amount of VAT can be a bit of a minefield. Some items fall under the standard rate, some are VAT exempt, some may even have their own rate. And what about those purchases where some items are VAT exempt, and some aren't but all on the same receipt? 

Selenity Expenses makes it easy for an organisation to reclaim the correct VAT and ensure HMRC compliance. All the rates are built into the system and calculations are done automatically in real-time when entering expenses and receipts added at the same time. Our customers have confidence that they're not only claiming back the correct amount, but they are maximising this reclamation too. Prior to automating their expenses, many organisations have told us they found the process too complicated and don't want to be found non-compliant if they have an HMRC inspection so they never fully reclaim.

How to claim the new amount correctly

When this VAT changed occurred, our customers needed to ensure that from the 15th July they're reclaiming the correct amount of VAT. How do they do that? It's really simple, they pop into Selenity Expenses, quickly and easily update the relevant VAT rates and that's it. Any expenses that fall under this VAT reduction are now accurately calculated at 5% and are HMRC compliant.


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