Pitch fees and temporary reduced rate of VAT FAQs

To support businesses most affected by the COVID-19 crisis, the government announced a temporary adjustment to VAT rates.

For the hospitality, hotel and holiday accommodation sector, a reduction in VAT from 20% to 5% has been applied from 15 July 2020 to 12 January 2021. This has now been extended to 31 March 2021. You can dowload a copy of our FAQ here.

This has raised a lot of questions for businesses that want to make the most of the savings but are unsure how to proceed. 

We have answered some frequently asked questions below in relation to pitch fees which we hope will help you to successfully make use of the support on offer. 

Frequently Asked Questions relating to pitch fees for the 2019-2020 season

1. Can I reclaim 15% of the VAT from HM Revenue & Customs (HMRC) in relation to the pitch fee allocated to the period from 15 July 2020 to the end of the 2020 season, even if I do not refund the VAT to my customers? 

Yes, you can be refunded the VAT from HMRC whether you refund the VAT to your customers or not. However, the amount you will be refunded from HMRC will depend on whether you refund the VAT to your customers or not. 

2. If the annual pitch fee of £3,000 for the 2019-2020 season runs from 1 December 2019 to 30 November 2020, then how much VAT can I reclaim from HMRC if I choose not to refund the VAT to my customer for the period at the 5% rate of VAT? 

Your refund would be calculated as follows:

Days at 5% VAT: 139 days  

Days at 20% VAT: 227 days 

Original VAT accounted for: £3,000 x 1/6 = £500 

Original net value of supply: £3,000 - £500 = £2,500 

Gross amount at 5% VAT: £3,000 x 139 days/366 days = £1,139.34 

Gross amount at 20% VAT: £3,000 x 227 days/366 days = £1,860.66 

VAT at 5%: £1,139.34 x 1/21 = £54.25 

VAT at 20%: £1,860.66 x 1/6 = £310.11 

Total VAT due: £54.25 + £310.11 = £364.36 

New net amount: £3,000 - £364.36 = £2,635.64 

Reduction to VAT to be made: £500- £364.36 = £135.64 

The £135.64 reduction in the VAT will have to be shown in your records as a reduction to the output VAT that you declare in Box 1 on your VAT return. 

3. If the annual pitch fee of £3,000 for the 2019-2020 season runs from 1 December 2019 to 30 November 2020 then how much VAT can I get back from HMRC if I choose to refund the VAT to my customer for the period at the 5% rate of VAT? 

Your refund would be calculated as follows:

Days at 5% VAT: 139 days  

Days at 20% VAT: 227 days

Original VAT accounted for: £3,000 x 1/6 = £500 

Original net value of supply: £3,000 - £500 = £2,500 

Net amount at 5% VAT: £2,500 x 139 days/366 days = £949.45 

Net amount at 20% VAT: £2,500 x 227 days/366 days = £1,550.55 

VAT at 5%: £49.45 x 5% = £47.47 

VAT at 20%: £1,550.55 x 20% = £310.11 

Total VAT due: £47.47 + £310.11 = £357.58 

New gross amount: £949.45 + £1,550.55 + £357.58 = £2857.58 

Reduction to VAT to be made: £500- £357.58 = £142.42 

The £142.42 reduction in the VAT will be the amount that is refunded to the customer and you can claim back from HMRC as a reduction to the output VAT that you declare in Box 1 on your VAT return. 

4. If I issued an invoice to my customer for the pitch fees, is there a time limit within which I need to issue a credit note to my customer for the VAT rate change to 5% for the period of 15 July 2020 onwards? 

Yes, if you have issued a VAT invoice then there is a time limit but if you have issued a proforma invoice then there is no time limit. If you have issued a VAT invoice showing the old rate of VAT, you must correct it by issuing a credit note within 45 days after the change. 

Frequently Asked Questions relating to pitch fees for the 2020-2021 season

1.If I raise an invoice to my customer now or at least on or before 31 March 2021 for the annual pitch fee for the 2020-2021 season can I charge at the 5% rate of VAT? 

Yes, as long as you raise a valid VAT invoice to your customer for the 2020-2021 season on or before 31 March 2021. If you raise a proforma invoice then you can only account for VAT at the 5% rate on payments received by you on or before 31 March 2021. 

2. When I raise an invoice to my customer now or at least on or before 31 March 2021 for the annual pitch fee for the 2020-2021 season can I include on that invoice the annual pitch fee for the 2021-2022 season as well and charge at the 5% rate of VAT on the full amount?

Yes, as long as you raise a valid VAT invoice to your customer for the 2020-2022 season on or before 31 March 2021. If you raise a proforma invoice then you can only account for VAT at the 5% rate on payments received by you on or before 31 March 2021.  

3. What information needs to be shown on a valid VAT invoice? 

 The following information needs to be shown for the invoice to be a valid VAT invoice: 

• a sequential number based on one or more series which uniquely identifies the document 
• the time of the supply (tax point) 
• the date of issue of the document (where different to the time of supply) 
• your name, address and VAT registration number - you may issue invoices under a trading name, but you must show the name and address under which you’re registered for VAT somewhere on the document 
• the name and address of the person to whom the goods or services have been supplied (your customer) 
• a description sufficient to identify the goods or services supplied 
• for each description, the quantity of the goods or the extent of the services, the rate of VAT, and the amount payable excluding VAT - this can be expressed in any currency 
• the gross total amount payable, excluding VAT - this can be expressed in any currency 
• the rate of any cash discount offered 
• the total amount of VAT chargeable - this must be expressed in sterling 
• the unit price  

4. If I give a discount to my customer for early payment then do I account for VAT at the 5% rate on the discounted amount rather than the full amount? 

Yes you can as long as you issue a VAT invoice before or on 31 March 2021 and state the terms of the early discount. If you do not wish to issue a VAT invoice then you can only account for VAT at the 5% rate on payments received on or before 31 March 2021. This may encourage home owners to pay early in order to obtain the discount. 

5. Can I accelerate my invoicing if the licence agreement renewal period commences after 31 March 2021? 

Yes you can. If you issue a VAT invoice by 31 March 2021 then you can account for VAT at the 5% rate on the pitch fee. 

6. If, in addition to the pitch fees, I charge my customer for electricity, water, rates and use of the shower block then can I charge at the 5% rate of VAT on all of this income? 

Supplying associated facilities with the pitch is classed as a single supply of a pitch. Therefore the 5% rate of VAT can be applied to the pitch fee and the fee for the associated facilities such as electricity, water and rates as long as it is invoiced before or on 31 March 2021 or full payment is received by 31 March 2021. 

Use of the shower block is not considered to be an associated facility. Therefore the standard rate of VAT at 20% would be applied to this charge. Similarly if there is a separate metered supply of water and electricity provided to the customer then these charges would not fall under the 5% rate of VAT related to the pitch fee. 

A separate metered supply of electricity would be charged at the 5% rate of VAT. A separate metered supply of water would be zero rated for VAT.

If you have any questions or queries that have not been answered above, please contact your usual Duncan & Toplis adviser or submit an enquiry to our team.