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VAT cut rumoured

A report in The Times this morning suggests that there may be a temporary cut in VAT to help ease the cost-of-living crisis.

A source close to No 10’s chief of staff Steve Barclay told the newspaper: “Steve has reinforced to ministerial colleagues that decisions on tax need to be taken by the prime minister and chancellor and that in exploring options, colleagues need to follow up on the commitments the prime minister made in his letter to MPs at the time of the leadership vote.”

The sector has been campaigning for a cut in VAT since VAT in hospitality rose from 12.5% to 20% in April.

At the time studies showed the industry was facing a 95% hike in energy bills, 19% in labour costs, and a 17% and 14% rise in food and drink prices, respectively.

The UK already has one of the highest rates of tax for food and accommodation Europe - in France and Spain the VAT rate is set at just 10%, for example.

Charlie Gilkes, founder and director of bar, restaurant and club operator The Inception Group, said: “The government could have helped ease the pain and aided the recovery by keeping VAT at 12.5%."

Sector investor, Paul Campbell, of Hill Capital Partners LLP said: “It’s disappointing that the government has withdrawn virtually all support from a sector that can demonstrably help drive the recovery, growth and create jobs - it had the opportunity to be far more progressive. Hospitality businesses are fighting an unprecedented wave of cost increases and doing all they can to keep prices down for their customers.”


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