Government says ‘no plans’ to reduce hospitality VAT

The government has responded to a petition calling for hospitality VAT to be cut to 10%, saying there are “no current plans” to reduce the sector’s VAT rate.

Andy Lennox, who runs the Fired Up hospitality group in Dorset, launched the petition late last year saying the 20% rate was saddling struggling businesses with huge tax bills, while reducing it to 10% rate for hot food, soft drinks events and door tickets, accommodation, and visitor attractions, would help venues cope with rising wages, food costs, energy bills and debts.

The Treasury said that while the government has no current plans to reduce the rate of VAT for the hospitality sector, “all taxes will continue to be kept under review”.

“VAT is the UK's third largest tax forecast to raise £161 billion in 2023/24, helping to fund key spending priorities such as important public services, including the NHS, education, and defence. The previous VAT relief for tourism and hospitality cost over £8b and introducing a 10% rate would come at a significant further cost,” the statement said.

“It was appropriate that as Covid-19 restrictions were lifted and demand for goods and services in these sectors increased, the temporary tax reliefs were first reduced and then removed in order to rebuild and strengthen the public finances.”

The government instead signposted to existing support measures including the Energy Bills Discount Scheme, the freeze in alcohol duty confirmed in the Spring Budget, and business rates relief announced last year.

The petition has so far received 17,727 signatures and received the government response having exceeded the 10,000-signature threshold. It remains open until 7 May and, if it reaches 100,000, will be considered for debate in Parliament.

In early 2021, Lennox launched a petition to extend the reduced 5% hospitality VAT rate brought in during the pandemic until March 2022, which reached almost 18,000 signatures and received a response from the government.

The British Beer & Pub Association (BBPA) has warned that average energy bills for a pub are expected to increase by £18,400 a year following the cut in government energy bills support this month. UKHospitality has said the sector is facing a £7.3b hike in its energy bills, with energy costs accounting for 11.4% of business turnover, up from 3.4% before the crisis.

This comes alongside a 10% rise in the minimum wage this month and record food price inflation.