News / Hospitality
Hospitality businesses back ten per cent VAT campaign
A petition to reduce VAT for hospitality businesses to ten per cent has been backed by business owners saying it would save their companies.
The widely-signed petition backed by celebrity chef Tom Kerridge and so far endorsed by 219,000 people calls for VAT to be halved from its 20% rate.
That, according to campaigners, would provide the hospitality industry much-needed respite from an unfair, heavily taxed and barely affordable landscape.
“Our tax system is horrendous. It’s the bane of our lives,” said Gurt Wings owner James Mitchell. “At the moment they are squeezing us so hard that come the VAT quarter it takes all your money – gone.
“Like everyone else we are clinging on with our fingertips. And that’s why businesses are closing down at a rate of knots.
“I hear every single day of pubs closing, restaurants closing, people being laid off. But (politicians) just don’t seem to care.”
Puja Chadha says the current tax system is unfair – photo: The Granary
The industry has faced a decade of high pressure, with Brexit increasing import costs, Covid forcing lockdowns, international unrest hiking utility bills and raised national insurance contributions making it harder to employ staff.
For The Granary co-founder Puja Chadha, the VAT reduction would help balance what she considers an unfair tax system.
“If you look at the big utility companies they are only paying five per cent,” she said.
“How is that fair? The big conglomerate is paying five per cent and the small, independent businesses are paying 20 per cent.
“We’re not saying we want to be treated better; we are just saying we want everyone to be treated equally.
That’s not the only unfairness in the system, according to Mitchell.
“Everything we buy we can’t claim VAT back,” he said, pointing to the fact that food ingredients are exempt from the tax though the VAT is added to them once they are cooked and served by a hospitality business.
“When you go to a garage or builder who does work on your house or work on your car, everything they buy has VAT on it they can claim back. But with us, everything we buy has no VAT on it so literally everything we buy we can’t claim VAT on.”
Some argue, however, that the fact food is VAT-free means hospitality businesses have lower overheads in the first place.
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The high rate of VAT facing UK businesses is unusual. Across Europe, countries offer a dropped-down tax rate for the hospitality sector, with such businesses paying as low as six per cent (Portugal), seven per cent (Germany) and eight per cent (Poland).
Here, meanwhile, VAT in the food and drink industry is as high as it is in the general market, despite evidence that lowering it would fuel the economy.
“I have been an advocate of fighting it for years to bring it in line with the rest of Europe,” said Mitchell.
“In Ireland they dropped it down to 13.5 per cent and immediately they realised it had a great impact on their economy.
“It would increase employment; it would make people pay more; get more money into the system.”
“We would love to employ young people but we have to make that decision as to whether we employ someone 18 or 19 or whether we employ someone (aged) 27 who comes with a lot of experience,” Chadha said.
A number of food and drink businesses have already closed in Bristol this year, including The Social, The Orchard Coffee & Co, Geppetto’s Pizza and Steak of the Art.
Main photo: Molly Pipe
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