Sunak urged to abandon VAT hike for hospitality 

Business leaders have made a last-ditch plea for Chancellor Rishi Sunak to keep VAT at 12.5 per cent for hospitality.

VAT for the sector, which includes pubs, restaurants and bars, was reduced to 5 per cent in 2020 to help firms recover from the first Covid lockdown. 

It rose to 12.5 per cent in October last year and is due to return to 20 per cent next month.

But industry leaders have warned Sunak that hospitality faces devastation if the rise goes ahead in today’s Spring Statement.

The industry body, UK Hospitality, said firms are already pushing up prices and cutting opening hours because of soaring energy costs.

It said: ‘It is imperative that the Government takes action to support the sector by extending the reduced rate of VAT beyond April and working with the sector to ensure that supply is guaranteed, and that cost pressures are mitigated.’

Wetherspoons pub chain boss Tim Martin said the higher level of VAT ‘does not make economic sense’.

He said food is VAT-free in supermarkets, putting pubs and restaurants at a disadvantage.

Martin said: ‘Pubs, restaurants and cafes play an important role in the social fabric of the nation, as well as generating employment and vast amounts of taxes for the Treasury. 

‘The industry understands that governments need tax but there should be a sensible rebalancing, so that all businesses selling similar products are treated in the same way.’

Chef Paul Askew of The Art School restaurant in Liverpool said it was ‘crunch time’ for the industry.

He said: ‘If VAT goes back to 20 per cent it’s only going to get worse again. The industry has been hit particularly hard by the pandemic and needs time to recover fully.’

Russell Nathan, senior partner at accountant HW Fisher, said: ‘British hospitality continues to cling on. 

However, the cost of living crisis will be as harmful to the British hospitality industry as Covid-19. We urge that he considers extending VAT relief until at least the end of the year.’