Hospitality Industry: VAT
The question
To ask the Chancellor of the Exchequer, if she will reduce the level of VAT on food and hot beverages in the hospitality sector.
Answered by James Murray
VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. Tax breaks reduce the revenue available for vital public services and must represent value for money for the taxpayer. Exceptions to the standard rate have always been limited and balanced against affordability considerations.
The exceptional VAT relief for tourism and hospitality during the Covid-19 pandemic cost over £8 billion. Reintroducing a similar relief would come at a significant further cost.
Delivering on its manifesto pledge, the Government will introduce permanently lower tax rates for high street retail, hospitality, and leisure (RHL) properties, with rateable values below £500,000, from 2026-27. In the meantime, the Government has prevented RHL relief from ending in April 2025 by extending it for one year at 40 per cent up to a cash cap of £110,000 per business and frozen the small business multiplier.
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