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Evening Standard
Evening Standard
Mark Banham

Pub and restaurant body challenges Chancellor on VAT budget omission

UKHospitality has challenged Chancellor Kwasi Kwarteng on VAT and business rates (PA)

(Picture: PA Media)

The industry body for the UK’s pub and restaurants has welcomed the mini budget from Chancellor Kwasi Kwarteng but has criticised  a lack of immediate measures including lower VAT and business rates relief that would bolster the ailing hospitality industry.

As part of Kwarteng’s radical tax cutting budget the Chancellor scrapped planned hikes in the tax paid on beer, wine spirits and cider as he introduced an “18-month transitional measure for wine duty”.

The cuts would mean that duty on draught beer and cider would fall by 5%. However, the hospitality industry has been dealing with a raised VAT rate of 20% since April this year since the easing of the pandemic along with, in many cases, increased business rates. Emergency measures had been taken to cut VAT to 12.5% prior to that.

Duty paid on alcohol is re-priced each year in line with inflation, but has been cut has been frozen or cut in every budget for the past nine years.

This will effectively scrap an initiative introduced by previous Chancellor Rishi Sunak announced in February this year that he would tax beverages based on their alcohol strength. Those changes had been due to come into effect from February 1 next year.

“I will also extend draught relief to cover smaller kegs of 20 litres and above, to help smaller breweries,” Kwarteng said. 

“At this difficult time, we are not going to let alcohol duty rates rise in line with RPI,” he added.

Boss of UKHospitality, Kate Nicholls, said that the objectives of boosting growth and tackling inflation rightly had put business at the heart of the Government’s agenda, but today’s measures would take time to take effect and her industry needed much more immediate help.

“The Chancellor committed to making the UK a globally competitive tax regime, yet overlooked two obvious levers to achieve that, through lower VAT and business rates reliefs. Our VAT rate is the highest in Europe, which is starkly at odds with ambitions for global tax competitiveness and will hopefully be addressed in the autumn budget, if not before,” she said.

“Our VAT rate is the highest among modern economies, so if we want a globally competitive market, we need lower VAT and an equitable alternative to business rates. Without such measures - which would help to keep prices down for customers - thousands of businesses and many more jobs will be lost,”  Nicholls warned.

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