UK — Chef Tom Kerridge is scheduled to launch a public campaign on Wednesday advocating for the reduction of Value Added Tax (VAT) on the United Kingdom's hospitality sector from 20% to 10%. The campaign, operating under the banner "VAT's the problem," seeks to address financial challenges within the industry.

Survey data commissioned by the hospitality industry indicates that 23% of businesses in the sector are currently losing money. Three months prior to this survey, the percentage of businesses reporting losses was 15%. Additionally, one in six hospitality businesses surveyed stated they risk closure within the next 12 months, and 5% reported not being financially viable.

Kerridge, who operates six venues and holds three Michelin stars, stated that the UK's hospitality culture faces "unfair levels of tax." He said, "Our hospitality culture in the UK is the best in the world, but we continue to be hit with unfair levels of tax." He added that "Almost every other country recognises the need to support hospitality with a lower rate of VAT." The UK's VAT rate on food and drink service is higher than the European average of 12.8%, with countries like France, Spain, and Italy applying a 10% VAT on hospitality, and Germany charging 7%.

The campaign has garnered support from other figures in the industry. Nick Mackenzie, chief executive of Greene King, which operates 2,700 venues, supports the campaign. Andy Burnham has indicated tentative backing for the proposed VAT reduction.

The Republic of Ireland is scheduled to lower its VAT rate for food-led businesses from 13.5% to 9% on Wednesday. Estimates suggest that implementing the VAT reduction policy in the UK could cost the Treasury between £10.5 billion and £12 billion. Tax Policy Associates stated that this amount could be used for other growth initiatives and asserted that a VAT cut would primarily benefit large businesses.

Why It Matters

The campaign for a VAT reduction in the UK hospitality sector addresses concerns about the financial health of businesses within the industry. A portion of hospitality businesses are reporting financial losses and a risk of closure, indicating a challenging economic environment for the sector. The proposed tax cut aims to alleviate some of this pressure.

The potential cost to the UK Treasury, estimated at up to £12 billion, is a central point of discussion, with Tax Policy Associates suggesting alternative uses for these funds. The comparison to VAT rates in other European countries, which are generally lower, provides a broader context for the UK's current tax policy affecting the hospitality industry.