Is VAT cut applied to advance purchase invoices?

richardtopham

We have paid for our UK holiday accommodation in advance but have not yet taken the holiday. VAT is reduced to 5% so will we get a refund on the VAT difference as we will take the holiday after the VAT rate has been cut?

davidmcn

Depends on the detail but I wouldn't have thought so - VAT is generally the rate applicable whenever it's invoiced, the fact it's for services provided later isn't relevant.

ceh209

OH thought the exact same thing but he's looked it up and the tax point is the earlier of payment and of the supply of services, so if you've already paid, the VAT will be at 20% still

https://www.gov.uk/vat-record-keeping/time-of-supply-or-tax-point

Jumblebumble

Thinking outside the box
Perhaps you could ask the supplier if you can cancel and then rebook at the new price

Castle

Jumblebumble said:

Thinking outside the box
Perhaps you could ask the supplier if you can cancel and then rebook at the new price

The new price, (before VAT), might be higher.

gettingtheresometime

The cynic in me says the VAT cut won't be passed on in any case.....if I'm charging £120 per night for a room, I'd still charge £120 per night & pocket the difference 

theonlywayisup

In my experience most consumers don't ask for a breakdown invoice and as such the total price is made up of service plus VAT.  All that will happen is the service element will now be more and the VAT element less; total will be the same. 

neilmcl

gettingtheresometime said:

The cynic in me says the VAT cut won't be passed on in any case.....if I'm charging £120 per night for a room, I'd still charge £120 per night & pocket the difference 

But if you're not getting the customers, then this gives the opportunity to reduce your prices without cost to you as an incentive to get new bookings. Which is exactly the purpose of the VAT cut in the first place. Hoteliers etc, will be desperate to get business and will definitely be passing the savings on. 

Penguin_

The 'saving' won't be passed on to the customer as there isn't a saving to the customer. The amount of VAT charged will change so instead of HMRC getting 20p for every £1 they will get 5p & the 15p will stay with the business.