Public Houses: VAT
The question
To ask the Chancellor of the Exchequer, whether she has conducted a comparative assessment of the potential impact of (a) VAT rates on food and drink served in pubs compared with (b) VAT rates applied in comparable European countries.
Answered by Dan Tomlinson
The Government recognises the significant contribution made by pubs 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. Reduced rates of VAT come at a significant cost to the Exchequer, reduce the revenue available for vital public services, and must represent value for money for the taxpayer.
HMRC estimates that the cost of reducing the 20 per cent standard rate of VAT on all accommodation and food and beverage services would be as follows in 2026-27: (a) to 15%: £5 billion, (b) to 12.5%: £8 billion (c) to 10%: £10.5 billion, (d) to 5%: £17 billion, (e) to 0%: £23.5 billion.
The Government is aware that some European countries apply reduced VAT rates to hospitality, reflecting different tax systems and policy choices. The Government keeps all taxes under review, with decisions on VAT rates taken by the Chancellor at fiscal events.
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