Hospitality Sector Faces ‘Cutting Off Oxygen’ Due to High VAT Rates

Pub owners across Birmingham are issuing a stark warning to the government, pleading for a reduction in Value Added Tax (VAT) rates. They argue that the current 20% VAT applied to all food and drink sold in pubs is stifling the industry, likening it to ‘cutting off the oxygen’ for struggling businesses.

A significant point of contention is the disparity between VAT rates for pubs and supermarkets. While pubs are mandated to charge 20% VAT on all their sales, supermarkets face a zero VAT rate on food items. This difference, pub representatives claim, allows retail giants to offer alcohol at significantly lower prices, creating an unfair competitive landscape.

Concerns Echoed by Local Officials

The issue has drawn attention from local leaders. In August of the previous year, when questioned about the government’s plans to address VAT concerns within the hospitality sector, West Midlands Mayor Richard Parker acknowledged the significant price difference in alcohol between pubs and supermarkets. At the time, he expressed uncertainty about the government’s willingness to tackle these specific issues.

‘Heartbreaking’ Reality for Pubs

Despite a potential lack of immediate government appetite, the VAT concern remains a critical issue for Birmingham’s pubs. The Station pub in Kings Heath has described the current situation as ‘heartbreaking,’ stating that VAT rates are actively driving hospitality businesses towards closure.

In a social media post, The Station detailed the immense pressures facing the industry:

The number of businesses in hospitality struggling right now is truly heartbreaking. They are being squeezed in every direction. Making us pay 20 per cent on every sale is driving so many out of business. This is on top of all the other taxes we have to pay. So many costs have risen from the core food and drink we buy from wholesalers, business rates, beer duty, employment charges, energy costs – it is the worst I’ve ever seen it.

I also think retail and the hair and beauty industry desperately need a VAT cut. We are cutting the oxygen off to so many businesses small and large. I’m a great believer in paying taxes as taxes build the fair and just society we all want to live in. However, they have to be fair and proportional. VAT at 20 per cent is neither fair nor proportional in the current economic landscape. It’s a lazy tax that kills enterprise, jobs and hope for so many. Young people are desperate for work, but the government has made it so tough because so many hospitality businesses are closing or cutting back. Please don’t tell me we can’t afford it; the money governments waste and burn every day is outrageous. They do this off the back of businesses across the country working so hard, yet often just surviving. If you love your local pub, or a coffee at your favourite cafe, or a meal at your favourite restaurant, please help them and share this so we can spread the message. Less VAT, more hope. Less VAT, more jobs. Less VAT, more beer. Thank you.

Call for a 10% VAT Rate

Similar sentiments have been voiced by The Dark Horse pub in Moseley, which is advocating for a reduction in the hospitality VAT rate to 10%.

The Dark Horse has launched a public appeal, highlighting the critical role of local venues:

VAT’s the problem. Do you want to back your favourite venue, help your high street, and support local jobs? Then sign our petition to lower the rate of VAT for hospitality to ten per cent. Our pubs, restaurants, cafes, hotels, nightclubs, and many more are at the heart of our communities. They bring people together and bring life to our cities, towns, and villages, but they’re under huge pressure from rising costs.

In the UK, you pay one of the highest VAT rates in Europe. Twenty per cent extra in VAT for your pint, meal out, or stay away. In France, Spain, and Italy, it’s ten per cent. In Germany? Seven per cent. Our message to Government is simple: Let’s stand together to say VAT at ten per cent is fair for hospitality.

The campaign emphasizes that a lower VAT rate would not only support these vital community hubs but also contribute to job creation and economic vitality across the nation.