VAT Changes Coming in 2026: What Businesses Should Prepare For

12 minutes ago
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Changes to Irish VAT rates taking effect from 1 July 2026 will require businesses to review more than just their invoicing processes. The changes may affect pricing strategies, accounting systems, contractual arrangements, point-of-sale systems and wider VAT compliance procedures.

Businesses impacted by the reduced rate should begin preparations well in advance of the implementation date.

What VAT Changes Take Effect From 1 July 2026?

Revenue issued guidance on the VAT changes in April 2026, providing greater clarity on how the revised rates will apply from 1 July 2026.

As part of Budget 2026, the VAT rate for certain food, catering and hairdressing services will reduce from 13.5% to 9% with effect from 1 July 2026. Revenue guidance confirms that the 9% rate will apply to qualifying restaurant, catering and hot takeaway services, together with hairdressing services.

The change does not apply to all supplies within the hospitality sector. Certain beverages, including alcohol, bottled water, soft drinks, sports drinks and vegetable juices, remain subject to VAT at the standard rate when supplied as part of restaurant, catering or takeaway services.

It is therefore essential for businesses to review their product and service offerings carefully to ensure the correct VAT treatment is applied.

Who Should Pay Attention?

The changes are particularly relevant for businesses operating in sectors such as:

Restaurants, cafés and coffee shops
Takeaway and hot food providers
Catering businesses
Hotels and guesthouses providing food or catering services
Hairdressing businesses
Businesses making supplies subject to multiple VAT rates

For businesses with a straightforward service offering, implementation may be relatively simple. However, businesses supplying a combination of qualifying and non-qualifying products and services may face more complex VAT considerations.

Importantly, while the VAT reduction is often associated with the hospitality sector, it does not generally extend to hotel or guest accommodation services, which remain subject to their existing VAT treatment. However, food and catering supplies provided by accommodation providers may qualify for the 9% rate, depending on the nature of the supply.

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Mixed Supplies Require Careful Review

One of the most significant practical challenges for many businesses will be correctly identifying supplies that qualify for the reduced rate.

Businesses selling a combination of qualifying and non-qualifying items may need to revisit how products and services are categorised within their systems. For example, restaurant meals may qualify for the 9% rate, while alcohol and certain beverages supplied as part of the same transaction remain liable to VAT at 23%.

Hotels, catering providers, hospitality businesses and operators offering bundled packages should take particular care where different VAT rates apply to different elements of a single transaction.

Check Your Pricing Before July

A VAT rate reduction presents both commercial and tax considerations.

Businesses should assess whether the reduction will be:

Passed on to customers through lower prices;
Retained to support margins;
Incorporated into a broader pricing review.

This is particularly important where customer-facing prices are quoted on a VAT-inclusive basis.

The appropriate approach will depend on a range of factors, including market conditions, cost pressures, competitive positioning and customer expectations.

Whatever approach is adopted, businesses should ensure that decisions are made consciously and documented appropriately.

Update Systems and Processes

VAT rate changes must be implemented correctly across all business systems.

Before 1 July 2026, affected businesses should review:

POS and till systems
Accounting software
Online ordering platforms
Invoice templates
VAT codes
Product and service classifications
Recurring billing arrangements
Price lists and menus
Internal controls and approval procedures

Errors in VAT coding can be difficult to identify immediately and may only become apparent during VAT return preparation or a Revenue intervention. Early testing of systems can help minimise implementation risks.

Review Contracts, Bookings and Customer Communications

Businesses should also review contracts, quotations and existing customer arrangements.

Where agreements span the VAT change date, consideration should be given to:

Whether prices are stated as VAT-inclusive or VAT-exclusive;
Whether contractual provisions accommodate changes in VAT rates;
Whether pricing updates need to be communicated to customers.

Clear communication is equally important internally. Staff should understand the revised VAT treatment and be able to explain pricing changes where required.

Preparing for the Transition

Businesses should also consider the VAT time-of-supply rules where deposits, advance payments or bookings are received before 1 July 2026 but the related supply takes place afterwards.

Particular attention may be required for:

Event deposits
Catering contracts
Corporate hospitality bookings
Recurring service arrangements
Prepaid vouchers and gift cards
Advance customer payments

The VAT treatment can vary depending on the nature of the supply and the timing of the tax point. Businesses should review these arrangements in advance to ensure the correct VAT rate is applied.

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Don't Forget Wider VAT Modernisation

Although separate from the VAT rate changes taking effect from July 2026, businesses should also be aware of Revenue's broader VAT modernisation programme.

Revenue has confirmed that, from 1 November 2028, VAT-registered large corporates will be required to issue structured e-invoices and report certain domestic business-to-business transaction data to Revenue. From the same date, all businesses will be required to have the capability to receive structured e-invoices.

While these obligations remain some distance away, they demonstrate the continued move towards more digital, data-driven VAT compliance.

Businesses can begin preparing now by:

Improving financial data quality;
Reviewing accounting and ERP systems;
Strengthening VAT coding procedures;
Assessing readiness for future e-invoicing requirements.

Key Actions Before 1 July 2026

Affected businesses should:

Identify supplies that qualify for the 9% VAT rate.
Review supplies that remain taxable at 13.5% or 23%.
Update POS, accounting and invoicing systems.
Review pricing strategies and customer communications.
Assess the treatment of deposits, prepayments and advance bookings.
Consider whether contracts require amendment to reflect the VAT change.
Ensure staff understand the revised VAT treatment.
Review VAT coding and VAT return processes before implementation.

How UHY FDW Can Help

While the VAT rate reduction is welcome for many businesses operating in the food, catering and hairdressing sectors, implementation will require careful planning.

Businesses should use the period before 1 July 2026 to review pricing, systems, contractual arrangements and VAT classifications to ensure the new rates are applied correctly from day one.

At UHY FDW, our tax team can assist businesses in assessing the impact of the changes, identifying potential risk areas and implementing practical solutions to support compliance with the revised VAT rules.