As explained in an earlier article, a reduced rate of VAT of 5% will apply from 25 June 2026 to 1 September 2026 (inclusive) to:  

• certain supplies of children’s meals;
• children’s admission to cinema screenings, theatrical performances (including shows and concerts) and exhibitions; and
• all admission tickets to certain attractions suitable for families with children.

ICAEW recognises the government’s desire to support families during the cost of living crisis. However, ICAEW believes that this measure has the potential to add complexity for businesses while producing very small savings for families. For example, consumers may be surprised by what does and does not qualify for the reduced rate, and that businesses may not always pass the benefits on.

Children’s meals don’t have to be eaten by children 

The temporary reduced rate applies to supplies of food and drink in the course of catering where the food and drink is:

• part of a children’s meal; and
• for consumption on the premises. 

For these purposes, a children’s meal is defined in the legislation as “a meal which is only held out for sale as a meal for a child”. HMRC’s guidance explains that how the meal is “marketed, presented and priced” is key to determining if the temporary reduced rate applies. A meal that is included on a “distinct children’s menu” would qualify as a “children’s meal”. 

There is no requirement in the legislation for the meal to be eaten by a child – as stated in HMRC’s guidance, the test is how the meal is marketed, presented and priced, not who consumes it. This means that a meal that is held out as a children’s meal can qualify for the reduced rate even if it is then eaten by an adult. However, HMRC’s guidance warns that “meals that include an alcoholic drink will not be regarded as a children’s meal”.

HMRC’s guidance states that the reduced rate does not apply for: 

• meals marketed as smaller portions;
• lower-calorie options;
• discounted versions of adult meals; and
• shared meals intended for both adults and children.

The exclusion for sports rules out some everyday activities

The temporary reduced rate does not apply to supplies of a right of admission to “a sports event or sports facilities” or to “an event or facilities for physical education or recreation”. 

ICAEW understands that, during webinars on this topic, HMRC advised that the reduced rate would not apply to ten-pin bowling, crazy golf, laser quest, go-karting or climbing walls – all of which will continue to be standard-rated. However, HMRC’s guidance states that admission to an indoor bounce park would qualify for the reduced rate. 

Businesses may question why trampolining, an Olympic sport, qualifies for the reduced rate in some circumstances while ten-pin bowling would not. Similar issues could arise with regard to other types of activity, illustrating the difficulties faced by businesses in applying the reduced rate, adding complexity to the tax system.

Businesses don’t have to pass the VAT cut on

Businesses will have set their prices for children’s meals and rights of admission on the basis that the standard rate of VAT (20%) applies. If the reduced rate (5%) applies, businesses must account for VAT at that rate to HMRC. 

However, there is no legal requirement for businesses to reduce their prices to reflect the VAT cut. Indeed, many businesses, faced with the additional costs of updating systems and processes for the change, may decide not to pass the VAT cut on to their customers or only pass on part of the cut. This may surprise parents who expect to pay a lower price – particularly if they are regular customers and are aware of the price. It may also cause issues for businesses when they defend their policy.

The case for reform

In its How to fix VAT campaign, ICAEW highlights the issues with the UK’s VAT regime, including the complexity that comes from having multiple rates of VAT and exemptions, and suggests ways in which it could be reformed. 

In April 2026, ICAEW launched a major programme of work on building a better tax system. As part of its work, ICAEW will diagnose what is wrong with the UK’s tax system and set out how it can be improved. The next paper in the series will focus on policymaking and will be published on the project hub page shortly. 

ICAEW continues to call for a simpler tax system, including moving over time to a single rate of VAT.