VAT rules relaxed for New Year's Day

Date: 4th November 2009

The VAT situation for pubs and other small businesses planning to stay open during the New Year festivities has been clarified by HM Revenue & Customs (HMRC).

Under new guidance released yesterday (November 3rd) by the taxation authority, all retailers and telecoms firms staying open between 12am and 6am on New Year's Day will not be affected by the end of the temporary VAT cut.

Currently, the sales tax stands at 15 per cent, down from its normal rate of 17.5 per cent.

However, the reduction is scheduled to end on January 1st 2010 - leading to concerns among business owners that they might have to hike their prices halfway through the night in order to stay strictly in line with the law.

Commenting on the decision, financial secretary to the Treasury Stephen Timms said: "New Year's Eve celebrations are a vital source of income for many in the service sector.

"To make the transition as easy as possible retail and telecommunication businesses will be able to charge VAT at the old rate into the early hours of New Year's Day."

The temporary VAT cut was originally introduced in November 2008.