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Lower VAT – a win on both sides of the bar

Tax Equality Day highlights imbalance which hurts pubs and restaurants

Tax Equality Day will take place on 20 September and will see pubs and restaurants around the UK lowering their prices for the day – to highlight the effects of a VAT cut on the eating-out and drinking-out sector. The Association of Licensed Multiple Retailers’ (ALMR) chief executive, Kate Nicholls, tells us why the campaign is important.

The ALMR has been the driving force in an industry-wide campaign to introduce a reduced rate of VAT for hospitality businesses, and Tax Equality Day forms part of that campaign.

Disadvantage

Currently, eating-out and drinking-out businesses in the UK pay the standard 20% rate of VAT on their food and drink. This puts them at a disadvantage when compared with supermarkets which pay no VAT on their groceries. This saving allows huge supermarkets to sell other goods, such as alcohol, at a discounted rate. Pubs and restaurants are vitally important parts of our communities and the UK’s economy, generating £60bn annually, and yet they find themselves on the back foot when competing with supermarkets for customers.

In VAT terms, there is a massive imbalance in the amount being paid by pubs and restaurants, compared with that of supermarkets. It is unlikely that any government would address this inequality by charging VAT on groceries, but the ALMR has been pushing hard for action to redress this imbalance by lowering the rate of VAT for eating- and drinking-out businesses.

Crucial

A recent report by HOTREC, the umbrella body for European hospitality associations, highlights the fact that the majority of EU countries currently applies a lower rate of VAT on their hospitality sectors.

This lower rate has been crucial in helping to stimulate demand and boost job creation across the continent. The report shows that hospitality in Europe created 2.5 million jobs in the past decade and identifies the favourable VAT rate as a key reason for the sector’s success.

The report will be a key resource for the ALMR as we engage with the government following the general election and approach Brexit. Brexit has thrown up a considerable amount of uncertainty for businesses, but there is an opportunity for us to secure a more favourable rate of VAT for the hard-working businesses we represent.

Boost

A VAT cut for the sector can help to stimulate demand, boost turnover and put employers in a better position to continue their investment in their venues and in their team members. There may be concern from decision-makers that a reduction in VAT will lead to a drop in receipts, but the report shows that a reduced rate can help to boost demand, entice customers into venues and stimulate an increase in sales.

The reduced rate would also send a message that the government is willing to support the sector, level the playing field and boost confidence. This year’s Tax Equality Day will be a fantastic opportunity for eating- and drinking-out businesses to get behind the campaign by involving their customers and spotlighting the positive effects of lower VAT. The ALMR will be encouraging all of its members to get involved to help to sway the government.

Kate Nicholls, Chief Executive of The Association of Licensed Multiple Retailers l This article first appeared in The Morning Advertiser publication