The Chancellor's announcement on Monday 24 November 2008 to cut the standard rate of VAT from 17.5 to 15 per cent (equal to a price reduction of 1/47th or 2.128 per cent) has no doubt created a lot of work for the industry, both before and after the change took effect today, (1 December), and running to 31 December 2009.

But what to charge? Patron Supplier accountants, Vantis, have advised that, where a 17.5 per cent VAT-inclusive price has been quoted for a hotel stay from 1 December onwards, but no deposit taken, the new 15 per cent rate should be charged to the customer: if 17.5 per cent is charged, this would not be an issue for HMRC, but would be a breach of contract with the customer, as VAT law provides that contract prices should always be adjusted in such cases.

And deposits? Vantis also advise that, where a deposit (or the total payment) is received before 1 December, creating a VAT tax point when the payment is received, but the supply of accommodation or catering takes place on or after 1 December, the hotel/restaurant has an option- either to adjust the VAT invoice from 17.5 to 15 per cent and issue a credit note or to account for VAT at 17.5 per cent on the amount paid before 1 December and at 15 per cent on the balance paid after that. If the customer is VAT registered, the latter will be more convenient.

Flat Rates Smaller hospitality businesses on this scheme, paying a lower VAT rate on all receipts, will, from 1 December, pay 5.5 per cent for pubs, 8.5 for hotels and 10.5 for catering.

Helpful Hints HM Revenue and Customs has issued a number of guides, which you can find here and here. These make it the rules clear relating to existing bookings, that you are not required to lower prices: that's a commercial decision for businesses.

Some help from the Chancellor- businesses having problems meeting their tax bills can get in touch with a new Business Payment Support Service. Go to www.hmrc.gov.uk/pbr2008/business-payment.htm for details of how to access the service. And the proposed April 2009 increase from 21 to 22 per cent in the small company Corporation Tax rate has been deferred to 2010. The Good News...

The Treasury has announced that the excise duty increase on spirits announced on Monday 24 November and also taking effect today (1 December) is being reduced to 4 from 8 per cent. Although, the 8 per cent rise on beer and wine is not being amended.