What were the rates and what did they affect?
The reduced rate of 5% applied for the period between 15th July 2020 and 30th September 2021. From October 2021 to March 2022 the rate was then increased to 12.5%, and from 1st April 2022 the VAT rate reverted back to 20%.
The reduced rate applied to supplies including:
- Food and non-alcoholic beverages for consumption on your premises (e.g. restaurants, cafes, pubs and bars)
- Hot takeaway food and non-alcoholic beverages
- Hotel accommodation
- Holiday accommodation
- Caravan and camping pitches
- Admission to certain attractions
Why is this important now?
Where a taxpayer has over declared output VAT, any errors must be adjusted within a period of 4 years from the end of the relevant VAT return period. Assuming a business is submitting VAT returns on a calendar quarterly basis, errors could only be adjusted as far back as VAT return period ending 30th September 2020.
For example, if you submitted your VAT return on 30th September 2020, you would have until 30th September 2024 to recover any VAT paid in error.
Once these periods fall out of time, a business will lose the opportunity to recover VAT which it may have overpaid in error, so you will need to act fast.
Businesses should act now
In circumstances where the dates when the supplies were made, the dates when payments were received and/or invoices were issued spanned periods where a different VAT rate was in force, it may be the case that a business could have overpaid VAT. If this is the case, then corrective action is required now before the 4-year time limit expires.
Many bookings and events were postponed and rescheduled due to the social distancing rules in place during the period of the pandemic, meaning it was relatively common for supplies and payments or invoices to span over periods where the rate of VAT changed. We recommend that businesses revisit VAT returns submitted during the time periods that fall within the pandemic and shortly after to ensure that VAT has not been overpaid.
How we can help
Our VAT team would be happy to assist and review your tax payments from this period, and with our expert guidance we can help you set it right. Speak to one of our professionals today to find out how you can recover any overpaid VAT.
