On 21 May 2026, Chancellor Rachel Reeves announced the Great British Summer Savings Scheme, a temporary cut in VAT from 20% to 5% on a defined list of family-focused leisure and hospitality supplies. The reduced rate applies from 25 June to 1 September 2026, covering the full school-holiday window across England, Scotland, Wales and Northern Ireland.
The measure is being funded by closing a tax loophole used by oil and gas companies and is positioned as cost-of-living relief in response to economic pressures linked to the conflict in the Middle East. For affected operators, the headline announcement is the easy part. The harder question is operational: how do you reconfigure your finance system to apply the reduced rate cleanly on 25 June, switch it back on 2 September, and produce a clean VAT return either side of the change?
For organisations running Microsoft Dynamics 365 Business Central, the answer is straightforward but requires planning. This article sets out what the cut covers, who is affected, and the practical setup needed in Business Central to handle it without disrupting day-to-day trading.
Guidance pending. At time of writing, HMRC has not yet published its full technical notice for the scheme. The scope detail below is drawn from the Chancellor's statement and Treasury briefing. Boundary cases, particularly around bundled tickets, season passes already sold, and the definition of a "children's meal", will be clarified when HMRC issues formal guidance. We will update this article as further detail is published.
Key takeaways
- The reduced 5% VAT rate runs from 25 June to 1 September 2026 across England, Scotland, Wales and Northern Ireland. The standard 20% rate returns on 2 September.
- In-scope supplies include tickets to fairs, theme parks, zoos and museums (adults and children), children's tickets to cinemas, concerts, soft play and the theatre, and children's meals in restaurants and cafes.
- In Business Central, the correct approach is to create a parallel reduced-rate VAT posting group setup rather than editing the existing 20% configuration, since both rates must operate concurrently.
- The built-in VAT Rate Change Tool under Setup and Extensions handles the bulk update of items, resources and general ledger accounts to the new posting group on 25 June.
- The reversal on 2 September is the most common error in temporary rate changes. Diary it now and leave the reduced-rate posting groups in place for credit notes and adjustments.
What the reduced rate covers
The 5% rate applies to admissions and selected children's purchases. Based on the Treasury announcement and HMRC's emerging guidance, in-scope supplies are:
- Tickets to fairs, theme parks, zoos and museums (adults and children)
- Children's tickets to cinemas, concerts, soft play and the theatre
- Children's meals in restaurants and cafes
Where an attraction already qualifies for the existing cultural VAT exemption, that exemption continues to take precedence and the new 5% rate does not apply. Operators selling a mix of in-scope and out-of-scope items, for example a zoo with a gift shop and an adult-only evening event, will need to handle multiple VAT rates concurrently for the duration of the scheme.
Who needs to act
If your business sells any of the above to UK consumers, you fall within scope. The most affected sectors are:
- Visitor attractions: theme parks, zoos, aquariums, farm parks, museums and heritage sites
- Family entertainment venues: soft play, cinemas, bowling, trampoline parks
- Hospitality operators selling children's meals
- Live entertainment: theatres, concert venues and family festivals
Booking platforms, ticket resellers and franchise operators selling on behalf of these businesses are also affected and will need to coordinate on the rate change with their suppliers.
The Business Central approach: don't overwrite, add a new rate
The instinct in a short-term VAT change is to edit existing VAT posting setups and flip them back at the end. Resist it. The standard rate of 20% does not disappear on 25 June; it continues to apply to the rest of your sales. What you need is a parallel reduced-rate setup that runs alongside your standard rate for ten weeks, then is retired.
Business Central handles this through its VAT posting group structure. The principle is the same one Microsoft recommends in its official guidance on VAT rate changes: create new posting groups for the reduced rate rather than modifying existing ones, then assign them to the affected items, resources or general ledger accounts on the switchover date.
Step 1: Create a new VAT product posting group
Navigate to VAT Product Posting Groups and create a new code, for example REDUCED5 with the description "Reduced Rate 5% Summer 2026". A dedicated code, rather than reusing any existing reduced-rate group, makes the temporary nature of the setup explicit and helps your finance team and auditor trace activity later.
Step 2: Create the VAT posting setup combination
Open VAT Posting Setup and create new lines combining your existing VAT business posting groups (typically domestic, EU and export) with the new REDUCED5 product group. For the domestic line, set:
- VAT Identifier: a new identifier such as DOM5
- VAT %: 5
- VAT Calculation Type: Normal VAT
- Sales VAT Account: your standard sales VAT control account (or a dedicated subsidiary account if you want clean separation in the nominal ledger)
- Purchase VAT Account: your standard purchase VAT control account
A dedicated subsidiary sales VAT account is worth considering. It costs nothing to set up and gives finance a single number to reconcile against expected scheme activity at month-end.
Step 3: Update affected items, resources and G/L accounts
This is the operationally significant step. From 25 June, every item, resource or general ledger account that represents an in-scope sale needs its VAT product posting group switched from the standard 20% group to the new REDUCED5 group. For a theme park, that might mean admission ticket items. For a restaurant chain, it means children's menu items only, leaving adult menu lines untouched.
For small numbers of items, this can be done manually. For larger catalogues, use the VAT Rate Change Tool under Setup and Extensions. This tool was designed for exactly this scenario and can update VAT product posting groups in bulk across items, resources, item charges and general ledger accounts. Run it in a sandbox first against a copy of your live data to confirm the conversion behaves as expected.
Step 4: Close open documents before the switch
The cleanest approach is to fully post and close open sales orders, purchase orders and journals before 25 June, so that new documents created from that date use the new rate. Where this is not practical, for example with pre-booked summer ticket sales already invoiced at 20%, take advice from your accountant on tax point treatment. HMRC's general rule is that the rate is determined by the tax point, not the date the visit takes place, but transitional rules and credit-note routes will apply in specific circumstances.
Step 5: Update your VAT Statement
Your VAT Statement template needs new rows to capture activity at the 5% rate, so that boxes 1 and 6 on your return continue to total correctly. Search for VAT Statements, open your GB VAT template, and insert rows for the new VAT posting setup combinations. Make sure the Row Totalling formulas for boxes 1 (VAT due on sales) and 6 (total value of sales excluding VAT) include the new lines. Test the statement against a few posted transactions before your return deadline.
Step 6: Plan the reversal on 1 September
On 2 September, the standard 20% rate returns. The mechanism is the mirror image of the switch-on: change the VAT product posting group on affected items, resources and G/L accounts back to your standard group. Leave the REDUCED5 posting groups in place rather than deleting them, since you will still need them to handle any credit notes, returns or late adjustments relating to the scheme period.
Diary the reversal task now. The most common error in temporary rate changes is forgetting to switch back, which produces under-collected VAT and a difficult conversation with HMRC.
Practical considerations beyond the system setup
A few wider points worth thinking through before 25 June.
Pricing decisions. The VAT cut does not automatically reduce your retail prices. You can choose to pass the saving on in full, in part, or absorb it as margin. Whichever you choose, ensure your e-commerce platform, EPOS and Business Central are aligned, particularly if prices are stored tax-inclusive in one system and tax-exclusive in another.
Reporting and audit trail. Run a Trial Balance and VAT detail report on 24 June and 1 September. These give you clean cut-off positions either side of the scheme that will save time at year-end and during any HMRC enquiry.
Mixed transactions. A family ticket bundle that includes adult admission, child admission and a meal may need to be split across multiple VAT rates on a single invoice. Test this on your most complex real-world scenarios before go-live, particularly if you use sales item groups or bundled SKUs.
Integrations. If Business Central feeds a booking platform, an EPOS system or a marketplace integration, the rate change needs to be reflected in those systems on the same date. Identify the integration points now and confirm with your platform providers how the change will be handled.
A note for accountants advising affected clients
If you are an accountancy practice with clients in the attractions, family entertainment or hospitality sectors, the scheme creates a concentrated five-week window where your phones will ring. Clients running outdated finance systems, spreadsheet-based VAT processes or older versions of Sage will face manual workarounds that introduce risk into their return. Clients on Business Central can be reconfigured properly in half a day.
This is the kind of moment our EdgeAdvisory accelerator is built for. EdgeAdvisory is Advantage's sector-specific Microsoft Dynamics 365 and Business Central practice for UK accountancy and advisory firms, supporting the firms that advise SMEs through exactly these kinds of regulatory shifts. If you have clients who would benefit from a properly configured cloud finance platform before the next temporary rate change comes along, or if you are looking for a partner to refer Business Central work to with confidence, we would welcome a conversation.
Working with Advantage
We have supported clients through previous temporary VAT changes, including the 2020 hospitality reduced rate, and the mechanics in Dynamics 365 Business Central are well understood. For most organisations the work is a half-day of configuration plus testing, provided it is planned before the deadline rather than improvised on 25 June.
If you would like support scoping the change for your environment, validating your VAT Statement updates, or running the VAT Rate Change Tool in a sandbox before go-live, get in touch or call us on 020 3004 4600. We can also help if you are unsure whether specific product lines fall within scope of the scheme.
The window between announcement and go-live is short. Five weeks is enough time to get this right, but only if the planning starts now.
Frequently asked questions about the summer VAT cut
Short answers to the questions Business Central users and finance teams are asking about the Great British Summer Savings Scheme.
When does the reduced 5% VAT rate apply?
The scheme runs from 25 June to 1 September 2026 inclusive. The standard 20% rate returns from 2 September 2026. The scheme applies across England, Scotland, Wales and Northern Ireland.
Which supplies are in scope?
Based on the Chancellor's announcement, the reduced rate covers tickets to fairs, theme parks, zoos and museums for both adults and children, plus children's tickets to cinemas, concerts, soft play and the theatre, and children's meals in restaurants and cafes. Where an attraction already qualifies for the cultural VAT exemption, that exemption continues to take precedence. Full HMRC technical guidance is still pending.
Do I need to reduce my prices?
No. The VAT cut does not require you to pass the saving on to customers. You can choose to reduce retail prices in full, in part, or retain the margin. Whichever approach you take, make sure your e-commerce platform, EPOS and Business Central are aligned, particularly if prices are stored tax-inclusive in one system and tax-exclusive in another.
How do I set up the reduced rate in Business Central?
Create a new VAT product posting group such as REDUCED5, create new VAT posting setup combinations at 5%, then update the VAT product posting group on affected items, resources and general ledger accounts on 25 June. The built-in VAT Rate Change Tool under Setup and Extensions automates the bulk update step. Test in a sandbox before applying to live.
Should I edit the existing 20% VAT setup instead?
No. The 20% rate continues to apply to most of your sales throughout the scheme period, so the existing setup must remain intact. Create a parallel reduced-rate setup that runs alongside it for ten weeks, then is retired after 1 September.
What about tickets already sold for visits during the scheme period?
HMRC's general rule is that VAT is determined by the tax point, not the date the visit takes place. Tickets invoiced before 25 June at 20% would normally remain at 20% even if the visit falls within the scheme period. Transitional rules and credit-note routes may apply in specific circumstances, and HMRC's technical notice will clarify the position. Take advice from your accountant on individual cases.
What happens on 2 September when the standard rate returns?
The reversal is the mirror image of the switch-on. Change the VAT product posting group on affected items, resources and general ledger accounts back to your standard 20% group. Leave the REDUCED5 posting groups in place to handle any credit notes, returns or adjustments relating to the scheme period. Diary the reversal task now, since forgetting to switch back is the most common error in temporary rate changes.
Can my accountant or Microsoft partner do this for me?
Yes. For most organisations, configuration plus testing is a half-day of work for an experienced Business Central consultant. Advantage supports clients through temporary VAT changes regularly and can scope the work, validate your VAT Statement updates and run the VAT Rate Change Tool in a sandbox before go-live.
