Overview:

Supplier invoice is a document issued by a vendor to a buyer, detailing the products or services provided and the amount owed. Due to COVID-19, the temporary VAT reduction for the tourism and hospitality sectors, initially set at 5%, has been extended until 30 September 2021, with an increase to 12.5% until 31 March 2022. To ensure accurate processing of supplier invoices under these reduced rates, refer to the guidance on the Gov.uk website. When applying these changes in Zumzum Financials, it is recommended to create and test custom tax rates in a sandbox environment before implementation in your production system.

Update on the Temporary Reduced Rate for the Tourism and Hospitality Industries

There is currently a temporary reduced rate for VAT of 5% which applies to hospitality, holiday accommodation and attractions. This was introduced by the Chancellor in July 2020 as an urgent response to the coronavirus (COVID-19) pandemic, to support businesses severely affected by forced closures and social distancing measures.

The temporary reduced rate was due to come to an end on 31 March 2021.

In the Budget in March, the Chancellor announced that the temporary reduced rate of 5% reduced rate would remain in place for a further 6 months and end on 30 September 2021. From 1 October 2021 a new temporary reduced rate of 12.5% will apply to these supplies and this will remain in place until 31 March 2022.

Guidance on the changes has been published on HMRC’s webpages on the Gov.uk website in the form of a Revenue and Customs Brief (RCB). The RCB can be accessed using the following link:

https://www.gov.uk/government/publications/revenue-and-customs-brief-2-2021-temporary-reduced-rate-of-vat-for-hospitality-holiday-accommodation-and-attractions/guidance-on-the-temporary-reduced-rate-of-vat-for-hospitality-holiday-accommodation-and-attractions

Process Supplier Invoice with the Temporary Reduced Rate VAT in Zumzum Financials

You are able to create your own custom tax rates in Zumzum Financials to help you process supplier invoices with the Temporary Reduced Rate VAT.  Follow the below procedure for each of the reduced rates you wish to add to your system.

Please test this procedure in your sandbox before implementing in your production org:

1. Follow the below steps to create a new Tax Rate using the suggested settings:
   • Tax Rate = 12.5%
   • Tax Rate Name: Temporary Reduced Rate 12.5%
   • Type = Standard Rate
   • Active = True
2. Once added you should be able to use it on a Purchase Invoice and confirm the calculations are correct.
3. Post the purchase invoice to your ledger.
4. Confirm the calculations are as you would expect on your VAT return by running a VAT Return.

Once you are happy the results are as you would expect, please proceed to apply this to your production org.

Learn more about purchasing processes in Zumzum Financials.