Reduced VAT top of operators’ Budget asks

By Nikkie Thatcher

- Last updated on GMT

Government announcement: the Budget is set to take place tomorrow (Wednesday 27 October) (image: Getty/stocknshares)
Government announcement: the Budget is set to take place tomorrow (Wednesday 27 October) (image: Getty/stocknshares)

Related tags Legislation Vat ukhospitality Business rates

Keeping the 12.5% VAT rate is the top priority for operators ahead of the Chancellor’s Budget tomorrow (Wednesday 27 October).

A snap poll of 55 operators conducted by The Morning Advertiser​ found a 12.5% permanent VAT rate would be most beneficial to their businesses with almost half (47%) of the votes.

This was followed by more than a quarter (27%) saying a reform of the business rates system would help most.

Some 15% voted in favour of a lower level of excise duty, 5% wanted a beer duty freeze and a further 5% said “other”.

Letter penned

This follows more than 200 chief executives of hospitality businesses signing a letter to the Chancellor, calling for the 12.5% VAT rate to be made permanent​.

The letter states a permanent 12.5% VAT rate would put a stop to price rises for families, enable the industry to generate new jobs, support higher wages and better training, unlock capital to deliver a greener future, and allow businesses to remain globally competitive.

The trade leaders, which include bosses of companies such as Fuller's, Loungers, Mitchells & Butlers, Punch Pubs & Co, Rekom UK, Revolution Bars Group, Stonegate and Oakman, have added their support to industry association UKHospitality (UKH)’s #VATsEnough campaign.

Critical component

UKH chief executive Kate Nicholls said: “Hospitality is a critical component of the UK economy, with the potential to be at the heart of the Government’s plans to Build Back Better. We can support job creation, levelling up and the road to net zero – but we need the Government to come with us on our recovery journey.

“Under current plans, VAT returns to its pre-pandemic level of 20% next April, meaning higher prices for consumers just at the time when they can least afford it. For businesses it will undoubtedly set off an inflationary spiral which will undermine wage growth, hit demand and ultimately threaten jobs.”

Furthermore, one operator told The Morning Advertiser ​a continuation of the reduced VAT rate would help draw customers and staff into the sector​.

Steve Orme from the Red Lion in Shepperton, Surrey called for Chancellor Rishi Sunak to keep the lowered VAT rate at the 2021 Budget. He said the reduction of VAT in lockdown was “absolutely needed” to help many businesses survive.

He said: “Many industries, our included, were decimated by the closures and the lockdowns, and reducing that VAT rate has allowed us to just retain a little bit more cash.

“[…] If the VAT hadn’t reduced, I would have had to increase my prices. Because it hasn't, I've managed to hold them steady which has been more attractive to people.”

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