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Temporary VAT reduction for hospitality, holiday accommodation and attractions

On the 8th July the government announced a temporary cut in VAT to 5% for specific suppliers operating in the hospitality, holiday accommodation and attractions sector. This change will come into effect on Wednesday 15th July and forms part of the government’s response to the current COVID-19 pandemic.

You can find more details on this announcement on the government’s website here.

Transitioning to 5% VAT

If the majority of your supplies will fall into scope for the reduced rate, you may wish to update your QuickFile settings so that the rate of 5% VAT will be defaulted on all your new sales invoices.

You can find this option by going into the top menu “Account Settings” then “Advanced settings”.


Other considerations

Here are a few other areas you may need to look at to ensure your accounting remains accurate and consistent.

PayPal feed

Do you have an active PayPal feed that is setup to auto-create new invoices? If the answer is yes and if you have elected to have VAT automatically applied, you may need to update your PayPal feed settings to apply the reduced rate of 5% VAT to all automatically generated sales invoices.

You can locate your PayPal feed settings by going into the “Banking” section, then view the PayPal statement and from “More Options” select “Feed Settings”.

Here you will find an option to set the default rate of VAT on sales.


Bank tagging rules

If you have any bank tagging rules that are automatically generating sales invoices for supplies that are eligible for the reduced rate of VAT, you would need to update those rules accordingly.

We would recommend that you disable “Automatic Bank Tagging” as a minimum to ensure that you are able to manually review and confirm your bank tagging rule matches.

Accounting for supplier invoices subject to the reduced rate

If you have a supplier who is in scope for the reduced rate of VAT on their supplies, you may wish to update that supplier’s default VAT rate in the supplier settings area. This will then ensure that any new expense items you create for that supplier will default to the new 5% reduced VAT rate.


Please first verify that the supplies will be made at the reduced rate before making this change.

I think you must have forgotten to “pin” this.

Hello. When I try to set the VAT rate to 5% from 20% following the instructions on here, it still works it out at 20%, although 5% has been set. I was thinking that I maybe need to set up a new client for “Cash Register Takings” and that the previous “client” cannot be altered, if you know what I mean. Is that the case?

@FolkLondon noted, and pinned.

@Oreo71 thank you for letting us know about that, we’ve identified and fixed the cause. It should go live with this evenings update.

Thank you. It’s working now.

Although this is now fixed, I have another query. As a hospitality business, we are supposed to still charge 20% VAT on alcohol, and the temporary 5% rate on hot food & soft drinks. Can you create a simple way to make two entries under “Cash Register Takings” to allow for the two different VAT rates?

Also, being partway through a VAT period, will the MTD return calculate VAT due at 20% prior to 15th July, and 5% on eligible sales from 15th July to the end of the period?

We can certainly look at this, but I suspect that it will require some work as we don’t have a specific column to set the VAT rate. This tool is designed to pull figures directly from a till report.

You could also just create an invoice, as that’s essentially what the cash register takings tool does in the background. You could then setup an inventory items for reduced and standard rate supplies.

In regards to the VAT calculations they will derive directly from the invoices created for that period. Providing you’re keying in your invoices post 15th July with the 5% rate the VAT return will account for this.

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