The UK's venues industry is beginning to recover from the economic downturn, but it is now faced with a VAT increase.
Announced in June as part of the emergency Budget, the move will see VAT rise by 2.5 percentage points from 17.5 per cent to 20 per cent.
Chancellor George Osborne said in his Budget speech that he expects the increase will generate £13 billion a year in extra revenues.
The change only applies to the standard VAT rate and there will not be any changes to the sales that are zero-rated or reduced-rated for VAT.
Although the increase will not be applied to traditionally VAT exempt items such as food, children's clothing, books or newspapers, venues across the country and organisers which use such facilities will be impacted by the increase.
Graham Stephenson, chairman of the Association of Event Venues, advised that companies which undertake business with other VAT registered companies need to understand the changes and update their systems in time.
From January 4th 2011, any sales of standard-rated goods or services which are made will be charged at the rate of 20 per cent.
Within the events industry, a key issue has been whether to charge VAT at 17.5 per cent or 20 per cent for events that are booked prior to January 4th but are taking place after the date.
In its advice, HM Revenue and Customers (HMRC) notes: "If you issue a VAT invoice or received prepayment before January 4th 2011 for goods or services which you provide on or after that date VAT will normally be due at the 17.5 per cent rate."
However, it also advised that in some cases VAT will be charged at a rate of 17.5 per cent on the date of issue of the VAT invoice or receipt of payment before 4 January 2011, with a supplementary charge of 2.5 per cent then becoming due after that date.
Another issue which venues and event organisers will need to consider is whether the VAT rate will be at its higher level if a conference takes place prior to January 4th but the invoice is not raised until after that date.
However, HMRC advised: "If you provide goods or services before January 4th 2011 and raise a VAT invoice after that date you can choose to account for VAT at 17.5 per cent.
"If your customer pays on or after January 4th 2011 for something they take away (or you deliver) before January 4th 2011, your sale takes place before January 4th 2011 and you should use the 17.5 per cent rate."
Mr Stephenson said venues which work with non-VAT registered businesses and customers will need to carefully assess the process.
"Companies need to proceed with caution so as not be left out of pocket by having to pick up the VAT, and in such cases I am sure many companies will move to VAT registered status or discuss alterations to either the products and services purchased or invoice amounts to compensate," he noted.
Another concern is that companies will decide that the 2.5 per cent increase is too much and opt to hold their event at their own offices.
Mr Stephenson noted: "The biggest impact will be at consumer events where organisers will be carefully reviewing their pricing policies to either increase the cost to the consumer, or keep the price the same and absorb the costs themselves depending on market forces."
Yet Douglas Acton, director of sales at Hotel Verta, isn't too worried about the increase.
"I don't think it will impact on venues. It's the same for everyone, so I think everyone will just accept it and move on," he said.