Applying the reduced VAT rate in FreeAgent

As part of last week’s Summer Economic Update, the government has announced a temporary reduction in VAT for the hospitality and tourism sectors. This will see the VAT rate for businesses in these industries change from the standard rate of 20% to the reduced rate of 5%. Here’s what you need to know in order to apply the reduced VAT rate to your clients’ transactions in FreeAgent quickly and easily.

Which transactions are applicable?

The reduced VAT rate will apply to the supply of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises between 15th July 2020 and 31st March 2021. The same reduction will apply over the same period to the supply of accommodation and admission to attractions. You can find more detailed information on the government’s website.

How to apply the reduced VAT rate to transactions

If any of your clients’ purchases qualify, you can apply the reduced VAT rate in FreeAgent when creating their bills and expenses or when explaining their bank transactions. You can also apply the reduced VAT rate to your clients’ invoices and to any sales that they record as bank transactions. Simply follow the steps in this Knowledge Base article to apply the reduced rate of VAT to your clients’ purchases and sales.