Holiday let and VAT

[Motheroftwofeline]

We have booking for holiday accommodation (in England) at the start of August. They have just invoiced us but the rate of VAT is still showing as 20%. This is going to cost us £150 more than the rate of 5%.

I’m mindful of the financial situation of the business (which is a small enterprise) but also of my own pocket where that is a lot to waste. We were happy and booked at the higher price though, obviously.

IABU to email and ask them to reduce the VAT and reissue the invoice? Or should I just pay up, knowing they’ll take it into profit?

I don't think they have to pass the cut on?

www.bbc.com/news/business-53340768

I've also seen a couple businesses that they won't pass the reduction on as they need the extra cash to keep going.

"The rate of VAT applied on most tourism and hospitality-related activities will also be cut from 20% to 5%. This will save households around £160 per year on average and, together with the Eat Out to Help Out Scheme, will support over 2.4 million staff at over 150,000 businesses, helping them recover and reopen after the Covid-19 lockdown. This will give these businesses the confidence to maintain their staff, as more people get through the door and business activity kick-starts again."

Taken from: www.gov.uk/government/news/rishis-plan-for-jobs-will-help-britain-bounce-back

Cancel and rebook. It'll be no skin if the nose of the hotelier. They will be passing whatever VAT they've charged on to the VAT people. I would think it unlikely they're doing a fiddle 'taking it into profit' as you stated, and keeping the difference if you've been issued with and/or paid an invoice with the VAT at 20% then they would be treading on dangerous territory. The VAT inspectors would be on them like a rash.

For clarity, this is what the Gov.uk site says in its overview:
This notice cancels and replaces Notice 709/3 (June 2013) and provides guidance on the introduction of the temporary 5% reduced rate of VAT that will apply between 15 July 2020 and 12 January 2021.

So it's not yet in place so they aren't acting illegally if they've billed you outside that period.

As I suggested, ask to cancel on the understanding you want to rebook at the new VAT rate. They have absolutely nothing to lose (if they are being above board).

As an individual booking a holiday you never agree a purchase price as x plus vat, it's always y inclusive of vat, so if the vat rate changes the overall price doesn't change, the business just accounts for it at whatever the vat rate is in the reporting period.

The invoice is correct as at today, as you charge vat at the rate on the day of invoice or on receipt of cash, whichever is earlier.

@TooBored If they put up the fee to accommodate (i.e.absorb) the VAT saving, while completely legal it will risk them looking opportunistic if it's rumbled. They'll also end up looking more expensive at the same time of course so it may well be counter-productive.

Ok, consensus seems to be I should pay, which I will do on the understanding the business is acting legally and fairly today. I’m not looking to ‘do’ a small business out of funds especially when they have been closed for months.

Yes the business doesn’t have to pass the saving to you. Strictly speaking they don’t even have to give you a vat invoice as you are not a business customer, so if you agreed £120 - the VAT shouldn’t matter,
You pay £120. They could of course pass it on to you for goodwill, but they have no obligation to.

Showing 20% on the invoice is correct as well - it should show 5% if issued after Wednesday.

Vat is for business they have no obligation to pass any savings on to the consumer

VAT is paid by consumers though, via the business? Hence the stimulus package to get people spending. It’s kind of a non point now as I’m going to pay it but I don’t agree it’s nothing to do with the consumer?