As many of you will be aware, the government announced several VAT measures to help support businesses through the challenges presented by COVID-19 during 2020 and 2021.
However, as we learn to live with the virus, those reliefs are due to expire, and businesses such as restaurants and hotels need to prepare their systems to return the 20% VAT rate. So, before delving into what these changes mean for your business, let's take a closer look at the upcoming changes.
Preferential VAT Rates for the Hospitality Industry Coming to an End
As you might recall, back in July 2020, the government announced several VAT changes to help hospitality businesses through the pandemic. These measures included a temporary reduction of the VAT rate for the hospitality, hotel and holiday accommodation sectors and admission to certain attractions from 20% to 5%.
In the spring 2021 Budget, the Chancellor announced a second extension to the relief until 30 September 2021. From 1 October 2021, the hospitality sector VAT rate then increased to 12.5% until 31 March 2022, after which time it is due to return to the standard rate, currently at 20%.
With VAT rates set to return to the pre-July 2020 level of 20% being applied to hot food and drinks eaten on the premises or taken away, hospitality businesses need to plan for those changes within their operations and payment systems.
How Hospitality Firms Can Plan for the VAT Changes
While restaurants and other hospitality venues have enjoyed the VAT relief and other measures such as Eat Out to Help Out, the time has now come to return to the operational procedures in place before the pandemic struck.
Given that these changes will further increase mounting costs, firms will have to look at ways to minimise the impacts on customers. Despite being hampered by the pandemic for more than two years, hospitality firms are still grappling with the rising energy, labour, food, drink, and insurance costs. Prices are set to rise by 11% this year as a result.
Firms can push hard to encourage diners and guests to spend with them in March before the inevitable price rises in April. However, it would help if you also used March to prepare your business for the upcoming changes, with updated menus, websites, and online ordering software with those new, likely higher prices.
Prepare for the Upcoming VAT Changes with MCR Systems
Of course, one of the most significant changes you'll need to make is with your EPOS system and backend enterprise operational software. With those systems updated, you can make sure your integrated accounting software is recording VAT correctly for Q2 2022 and beyond, helping you avoid problems with filings to HMRC.
The good news is that with MCR Systems, you can fully customise your EPOS hardware and software with just a few clicks. While you will still probably need to go through the upheaval of changing a number of your firm's customer touchpoints (such as menus and websites), you have peace of mind that the VAT changes will be simple to implement from an operational standpoint.
Is your business ready for the increased VAT rates? If you're worried about the work involved in updating your operations to reflect the changes, don't hesitate to contact a member of our team to discuss an easier way to update all of your systems. Our flexible, cloud-based hospitality hardware and software solutions can be seamlessly updated in real-time, minimising the operational impacts of these changes. To learn more about how our technology can benefit your business, click here.