Temporary Reduction in VAT for Hospitality Industry
Discussion
Tomorrow we are going to a campsite for 2 weeks. On 8th July the VAT rate reduces.
Am I right in thinking if we pay tomorrow for the full period then the site operator will have to charge 20% VAT on the whole person and indeed pay 20% over to HMRC?
So if tomorrow we pay until Wednesday they will hand 20% of that to HMRC. If on Wednesday we pay for the remainder they would only have to hand 5% to HMRC?
I am not looking to pay less but for the site to make up a bit for lost income over the last few months.
Am I right in thinking if we pay tomorrow for the full period then the site operator will have to charge 20% VAT on the whole person and indeed pay 20% over to HMRC?
So if tomorrow we pay until Wednesday they will hand 20% of that to HMRC. If on Wednesday we pay for the remainder they would only have to hand 5% to HMRC?
I am not looking to pay less but for the site to make up a bit for lost income over the last few months.
Simpo Two said:
Chrisgr31 said:
I am not looking to pay less but for the site to make up a bit for lost income over the last few months.
It won't make any difference to them; whatever they collect as VAT they will have to send to HMRC. They just get the net amount which is the same either way.Simpo Two said:
It won't make any difference to them; whatever they collect as VAT they will have to send to HMRC. They just get the net amount which is the same either way.
That’s not correct.The majority of hospitality and retail display and charge their customers inclusive of VAT. Therefore when the vat rate reduces the net amount after vat (ex vat) will be more.
e.g.
£100 inc vat @ 20% ——> £83.33 ex vat
£100 inc vat @ 5% ———> £95.24 ex vat
The retailer is under no obligation to reduce the price or pass on any savings to their customers unless prior contractual agreement.
Whether they should or not is another argument.
Sy1441 said:
Chrisgr31 said:
So am I right to think I am better to pay in 2 batches. I will pay the same but the site will get a greater amount?
This would indeed do what you want it to and allow the site to have a bigger % of the income retained,Ham_and_Jam said:
That’s not correct.
The majority of hospitality and retail display and charge their customers inclusive of VAT. Therefore when the vat rate reduces the net amount after vat (ex vat) will be more.
e.g.
£100 inc vat @ 20% ——> £83.33 ex vat
£100 inc vat @ 5% ———> £95.24 ex vat
The retailer is under no obligation to reduce the price or pass on any savings to their customers unless prior contractual agreement.
Whether they should or not is another argument.
Eh surely the calc is either £83 + 20% VAT or the same + 5% VAT. Customers should be paying less if VAT goes down.The majority of hospitality and retail display and charge their customers inclusive of VAT. Therefore when the vat rate reduces the net amount after vat (ex vat) will be more.
e.g.
£100 inc vat @ 20% ——> £83.33 ex vat
£100 inc vat @ 5% ———> £95.24 ex vat
The retailer is under no obligation to reduce the price or pass on any savings to their customers unless prior contractual agreement.
Whether they should or not is another argument.
TX.
As I said, that’s a completely different discussion.
The retailer displays their goods or services as prices including VAT, and they can set that price at whatever level.
As a customer you choose whether you want to buy at that price or not.
Personally I would expect some reduction in prices across the hospitality industry during the VAT reduction scheme, as market forces will come into play. However there is no obligation.
The retailer displays their goods or services as prices including VAT, and they can set that price at whatever level.
As a customer you choose whether you want to buy at that price or not.
Personally I would expect some reduction in prices across the hospitality industry during the VAT reduction scheme, as market forces will come into play. However there is no obligation.
Terminator X said:
Eh surely the calc is either £83 + 20% VAT or the same + 5% VAT. Customers should be paying less if VAT goes down.
TX.
Yes, that is how it should work. It all depends on the integrity of the business. If they charge an inclusive fee they may not change it then they make more profit.TX.
With regards to the VAT payable, it depends on when they account for their VAT. If they operate a cash accounting system it's when the payment is received.
Road2Ruin said:
Terminator X said:
Eh surely the calc is either £83 + 20% VAT or the same + 5% VAT. Customers should be paying less if VAT goes down.
TX.
Yes, that is how it should work. It all depends on the integrity of the business. If they charge an inclusive fee they may not change it then they make more profit.TX.
With regards to the VAT payable, it depends on when they account for their VAT. If they operate a cash accounting system it's when the payment is received.
Anonymous-poster said:
Road2Ruin said:
Terminator X said:
Eh surely the calc is either £83 + 20% VAT or the same + 5% VAT. Customers should be paying less if VAT goes down.
TX.
Yes, that is how it should work. It all depends on the integrity of the business. If they charge an inclusive fee they may not change it then they make more profit.TX.
With regards to the VAT payable, it depends on when they account for their VAT. If they operate a cash accounting system it's when the payment is received.
If I were a business in this position I'd reduce the price by some (or possibly most) of the VAT saving - drives motivation to purchase for the customer and means a little more margin for the operator. As a customer I'd be happy to save a little and be able to let a business that got hammered by Covid-19 make some extra margin. Win-win for both parties.
Even if the business reduces by the VAT amount in full they would still be in exactly the same position margin-wise as they were when VAT was at 20%.
Edited by Funk on Sunday 12th July 13:03
Ok, so I have booked a nice self catering accommodation to use in a few weeks time, via a relatively large travel operator.
I have already paid a deposit, but have circa £1500 balance to pay next week. Would you be asking them to re-invoice the balance to factor the VAT rate reduction?
Its more likely a moral decision, as ultimately some would look to allow said company to net a larger profit due to their troubles through COVID. But on the other hand you could look at it as helping my household/business as we retain some of our cash and havent otherwise received any grants or help from the Gov.
What would you do and what do you expect such outfits to come up with as people start making this request.
I have already paid a deposit, but have circa £1500 balance to pay next week. Would you be asking them to re-invoice the balance to factor the VAT rate reduction?
Its more likely a moral decision, as ultimately some would look to allow said company to net a larger profit due to their troubles through COVID. But on the other hand you could look at it as helping my household/business as we retain some of our cash and havent otherwise received any grants or help from the Gov.
What would you do and what do you expect such outfits to come up with as people start making this request.
russy01 said:
Ok, so I have booked a nice self catering accommodation to use in a few weeks time, via a relatively large travel operator.
I have already paid a deposit, but have circa £1500 balance to pay next week. Would you be asking them to re-invoice the balance to factor the VAT rate reduction?
Its more likely a moral decision, as ultimately some would look to allow said company to net a larger profit due to their troubles through COVID. But on the other hand you could look at it as helping my household/business as we retain some of our cash and havent otherwise received any grants or help from the Gov.
What would you do and what do you expect such outfits to come up with as people start making this request.
If you have already booked and paid a deposit I doubt the VAT rate can now be changed as they would have calculated it at the prevailing rate at the time of booking. A refund and re-invoice would work, If they are willing to do it.I have already paid a deposit, but have circa £1500 balance to pay next week. Would you be asking them to re-invoice the balance to factor the VAT rate reduction?
Its more likely a moral decision, as ultimately some would look to allow said company to net a larger profit due to their troubles through COVID. But on the other hand you could look at it as helping my household/business as we retain some of our cash and havent otherwise received any grants or help from the Gov.
What would you do and what do you expect such outfits to come up with as people start making this request.
Surely the first thing to establish is whether they are actually dropping their rates to account for the VAT change. They're not obliged to pass it on.
Businesses can keep their gross prices and rates (i.e. the one you originally agreed to) just as they are, and keep the extra profit that the lower VAT rate allows, if they want to. Some businesses might see it as extra support in these coviddy times.
Businesses can keep their gross prices and rates (i.e. the one you originally agreed to) just as they are, and keep the extra profit that the lower VAT rate allows, if they want to. Some businesses might see it as extra support in these coviddy times.
kev1974 said:
Surely the first thing to establish is whether they are actually dropping their rates to account for the VAT change. They're not obliged to pass it on.
Businesses can keep their gross prices and rates (i.e. the one you originally agreed to) just as they are, and keep the extra profit that the lower VAT rate allows, if they want to. Some businesses might see it as extra support in these coviddy times.
Why do you say they are not obliged to pass it on? Using the £100 example above, the nett cost is £83 so they either add on 20% to get to £100 or 5% to get to £87. The £83 they keep and the VAT gets passed to HMRC. Whether VAT is included in the £100 or not in the £83 is neither here nor there surely?Businesses can keep their gross prices and rates (i.e. the one you originally agreed to) just as they are, and keep the extra profit that the lower VAT rate allows, if they want to. Some businesses might see it as extra support in these coviddy times.
Let's just say that I either advertise my day rate at £100 incl VAT or £83 ex VAT. Are you saying that if the former I could pocket the difference vs the later not?
TX.
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