Hospitality Industry: VAT
The question
To ask the Chancellor of the Exchequer, whether she has considered introducing a reduced or tiered VAT rate for pubs and restaurants.
Answered by Dan Tomlinson
The Government recognises the significant contribution made by hospitality businesses to economic growth and social life in the UK.
VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. Introducing reduced or tiered VAT rates would reduce tax revenue and add complexity to the tax system.
HMRC estimate that the cost of a 5 per cent reduced rate for accommodation, hospitality and tourist attractions would be around £13 billion this financial year. If the scope were also to include alcoholic beverages, the cost would be approximately £3 billion greater. This would reduce VAT revenue, which pays for public services, by almost 10% in 2025/26.
The Government is aware that some European countries apply reduced VAT rates to hospitality.
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