VAT reduction

janewillis123

Hi I’m due to pay the balance on my cottage via a cottage holiday rental company on Wednesday I have rang the company to check the payment will be reduced to 5% vat and they said I wasn’t paying vat which I don’t think is true just because they don’t show it doesn’t mean it’s not in the price j

mazzer71

You are only charged VAT by businesses that are VAT registered. You only have to register for VAT as a business if your income is above a certain level. You have to show VAT on an invoice legally. If it’s not shown on yours, then you haven’t been charged it. You should also be aware that there is no requirement for businesses to pass on the reduction as this is a business support measure to help businesses who might otherwise go under.

Chris4567

I have the same question. Rural Retreats, our holiday provider, is refusing to pass on the VAT reduction claiming that our contract is with the individual property, not with them, even though the entire payment is transacted by Rural Retreats who do charge VAT. This doesn't sound right to me.

Chris4567

mazzer71 said:

You should also be aware that there is no requirement for businesses to pass on the reduction as this is a business support measure to help businesses who might otherwise go under.

I'm not so sure about that. The measures announced by The Chancellor are intended to increase demand in the UK so surely the VAT rate cut should be passed on to the customer.

Chris4567

Chris4567 said:

mazzer71 said:

You should also be aware that there is no requirement for businesses to pass on the reduction as this is a business support measure to help businesses who might otherwise go under.

I'm not so sure about that. The measures announced by The Chancellor are intended to increase demand in the UK so surely the VAT rate cut should be passed on to the customer.

According to The Telegraph >Rishi Sunak, the Chancellor, announced the tax cut on Wednesday to give businesses in the hospitality and leisure sector confidence that "the demand will be there" as they reopen their doors.<

mattyprice4004

Chris4567 said:

I have the same question. Rural Retreats, our holiday provider, is refusing to pass on the VAT reduction claiming that our contract is with the individual property, not with them, even though the entire payment is transacted by Rural Retreats who do charge VAT. This doesn't sound right to me.

The businesses' VAT affairs are just that - their own affairs. They can choose to pass the saving on or not; this was even mentioned in the announcement. 

If they don't want to, they don't have to. Also bear in mind the tax point is when you paid - and it's not retrospective, so if booked before the rate drops you get nothing anyway. 

tripled

The change in VAT rate is irrelevant if you have already been invoiced or paid a deposit. The VAT rate they have to charge is the one at the "tax point" - see https://www.gov.uk/vat-record-keeping/time-of-supply-or-tax-point. If they are VAT registered, they will have to hand over the full 20% to HMRC.

With regards to "they can choose to pass the saving on or not", to be pedantic that's not technically true, VAT is collected by a business on behalf of HMRC and cannot be retained by the business. However, what they can do is increase their ex-VAT prices the day the VAT change comes in, so the end price for retail sales is effectively the same.

Chris4567

mattyprice4004 said:

Chris4567 said:

I have the same question. Rural Retreats, our holiday provider, is refusing to pass on the VAT reduction claiming that our contract is with the individual property, not with them, even though the entire payment is transacted by Rural Retreats who do charge VAT. This doesn't sound right to me.

The businesses' VAT affairs are just that - their own affairs. They can choose to pass the saving on or not; this was even mentioned in the announcement. 

If they don't want to, they don't have to. Also bear in mind the tax point is when you paid - and it's not retrospective, so if booked before the rate drops you get nothing anyway. 

Thank you. Can you clarify, i the tax point when we book or when we pay? I can well understand that a deposit payment to secure a booking pre VAT change would still attract VAT at the old rate. But the balance due after the VAT change should surely attract the new lower rate?

Penguin_

Chris4567 said:

Thank you. Can you clarify, i the tax point when we book or when we pay? I can well understand that a deposit payment to secure a booking pre VAT change would still attract VAT at the old rate. But the balance due after the VAT change should surely attract the new lower rate?

It will be whenever they raise an invoice on their finance system. Where we work, in a company which owns multiple holiday parks, if a customer pays a deposit today for a holiday the holiday will be invoiced tomorrow when I get details of the break. If I raise an invoice for the holiday today it will be at 20% but if I wait until tomorrow it will be at 5%.

Chris4567

Chris4567 said:

mattyprice4004 said:

Chris4567 said:

I have the same question. Rural Retreats, our holiday provider, is refusing to pass on the VAT reduction claiming that our contract is with the individual property, not with them, even though the entire payment is transacted by Rural Retreats who do charge VAT. This doesn't sound right to me.

The businesses' VAT affairs are just that - their own affairs. They can choose to pass the saving on or not; this was even mentioned in the announcement. 

If they don't want to, they don't have to. Also bear in mind the tax point is when you paid - and it's not retrospective, so if booked before the rate drops you get nothing anyway. 

Thank you. Can you clarify, i the tax point when we book or when we pay? I can well understand that a deposit payment to secure a booking pre VAT change would still attract VAT at the old rate. But the balance due after the VAT change should surely attract the new lower rate?

And according to an HMRC adviser this morning:

"If they were to charge the full 20% then they would be legally required to pass on that 20% to HMRC and not pocket the 15%."

Retireinten

I've coordinated the changes relating to the VAT reduction for my company this past week... 

A company does not have to pass on this VAT cut. You will no doubt have booked a holiday at an agreed amount inclusive of VAT. 

This is a business support measure, a business can choose to pass on the VAT to the consumer in the hope that drums up more business OR they can choose to bank the savings (by reducing VAT to 5% and increasing their net prices) to increase sales income now. 

The decision will likely be based on what their competitors do, their financial position and the administration costs of passing on the savings (think web page updates, marketing and admin changes in addition to system changes needed to manage this reduction).