Upcoming VAT Increase on 31st August 2023: Prepare in Advance!

August 15, 2023

Upcoming VAT Increase on 31st August 2023: Prepare in Advance!

The COVID-19 pandemic has taken a heavy toll on businesses in the hospitality sector over the last number of years.  In an effort to support these struggling businesses, the Irish government implemented a temporary VAT reduction to 9% in the Budget of 2021. This reduction aimed to provide much-needed relief to businesses heavily reliant on tourism and dining revenue. The 9% VAT rate on hospitality is applied to catering and restaurant services (food not soft drinks or alcohol), tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter, and hairdressing.

Extension of VAT Reduction:

Originally scheduled to end in August 2022, the VAT reduction was extended not once, but twice. First, until 28th February 2023, and then further extended until August 31st 2023. These extensions were welcomed by hard-working businesses that rely on this relief to sustain their operations in challenging times.

Concerns on the Impact:

While the VAT increase is imminent, some businesses have expressed their concerns about the potential repercussions. They fear that this increase could prompt closures and adversely affect their ability to stay afloat.

Industry Advocacy:

In response to the VAT increase, the Restaurants Association of Ireland and the Irish Hairdressers Federation have united their efforts. They aim to advocate for a further extension of the reduced rate or even a permanent adjustment. However, in a recent article by RTE News, they mention that the Department of Finance announced that there will be no further extension.

Passing the Increase:

With no alternative options, these businesses will have no choice but to pass on the burden of the VAT increase to the already-stretched consumer. As a result, customers may face higher prices for goods and services in these heavily impacted industries.

Advocating to Extend or Permanently Fix 

In an effort to extend or permanently address the VAT in the hospitality sector, representatives from these industries have been actively engaging with the government. Their aim is to advocate for an extension of the reduced rate or even a permanent adjustment in VAT policy. To amplify their cause and raise awareness, these industry representatives have also reached out to various publications in recent weeks. Their goal is to shed light on the potential implications of the VAT increase on their sectors, urging policymakers to give further consideration to their concerns.

The VAT Increase in Ireland has become a game-changer for different industries, particularly the hospitality sector. While some businesses are concerned about the effect on their survival, industry associations continue their efforts to influence a change in the VAT rate. As the decision looms, the future of these industries hangs in the balance, leaving both businesses and consumers on edge.

If you are preparing for this change in your business and seeking guidance on how to navigate the impact, our team at MA Whately is here to help. 

We understand the challenges that lie ahead and can provide tailored solutions to assist you in adapting to the new VAT landscape. Please don't hesitate to get in touch with us by clicking here to discuss how we can make necessary changes within your business to effectively deal with this situation.

Together, we can overcome the challenges posed by the VAT increase and pave the way for a successful future in your industry.

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