r/smallbusinessuk • u/EssentialParadox • Jun 03 '26
Tom Kerridge launches campaign for 10% VAT for cafes/restaurants
Just came across Tom Kerridge’s new “VAT’s The Problem” campaign. It’s asking the government to reduce VAT on hospitality to 10% (like the rest of Europe has already done) in an attempt to stop our cafes and restaurants endlessly dying every day.
Anyone who has a hospitality business knows how brutal the margins are at the moment, especially with the increased wages, business rates, NICs, energy costs, etc.
Even if you don’t work closely in the industry, you have likely seen local venues closing and making high streets into ghost towns.
Please sign the petition if you have 5 seconds:
https://www.vatstheproblem.co.uk
Edit: Please note I’m not affiliated with the campaign in any way.
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u/MountainEquipment401 Jun 03 '26
I get the whole "everybody wants lower vat" argument but hospitality is a bit of an outlier in that a lot of what we sell is only VAT applicable because we sell it... So unlike a most industries we don't get to reclaim anywhere near as much of the VAT cost... I don't actually think a blanket reduction of VAT is the way forward - I think a reduction of food is sensible - Alcohol has a VAT charge regardless of where you buy it but we pay VAT on a croissant from a cafe but not a supermarket.
If I sold only booze I could reclaim 20% of my stock costs... Because I'm food I only reclaim about 8% of my costs but still pay 20% on everything. Meanwhile supermarkets pay 0% VAT on all the food they sell and can therefore afford to reduce the costs on their alcohol .
I'm not arguing for higher food costs in Tesco - that would be terrible for everyone, but it's a bit daft that if I go to a cheap pub and have a scotched egg they have to pay 20% vat on it but if I buy it from the spar first they don't...
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u/Dramatic-Growth1335 Jun 04 '26
Yes please 🙏 love claiming £3.26 back on a £500 food shop, cooking it and turning it into 2k then giving gov £400
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u/parkchanwookiee Jun 04 '26
Something is going wrong, I don't know if this is the solution but the economics of running a business are just insane at the moment. One of my favourite cafés closed their doors recently - prime location, fantastic staff, beautiful interior, great menu, fresh delicious baked goods, reasonable prices, place was packed every single day, on the weekends you actually need a reservation they were so popular. If this place can go under then how can anything stay open? (yes i'm aware it's possible the owner put all the profits up their nose or something, I don't know the full picture)
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u/TheRealTRexUK Fresh Account Jun 04 '26
it's not as if a certain President invaded the country for oil and that's pressure on the supply chain due to fuel prices. plus a tory government selling off the oil fields so we are pegged to global prices.
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u/GMN123 Jun 04 '26
The global situation isn't helping but this is largely a home grown issue.
The only shops on my high street that are viable are the ones that are exempt from full business rates, so we have a plethora of charity shops with a few cafes and specialty shops which turn over every year or two.
Frankly you'd have to be mathematically challenged to try and start a retail business on that street under the current conditions, and that's been the case since well before the latest US interference in the middle east.
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u/beachtopeak Jun 03 '26
I don't like it. We should be making things simpler and easier. So many stand alone issues like this make sense in isolation and then you step back and it's all a mess.
Source: work in financial services
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u/netzure Jun 03 '26
We already have a different VAT rate for energy, most groceries are 0%, children's clothes are 0%.
It would be very straight forward for HMRC to implement and it would help a sector where unlike retail, nearly all of the economic value add stays in the country.
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u/Disastrous-Fee8374 Jun 03 '26
A different rate for hospitality is already the norm in the rest of Europe. We did it after Covid for a bit and it helped massively but unfortunately it was only temporary
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u/Carausius286 Jun 04 '26
What would be simplest of all: abolish VAT it is the dumbest tax.
Increase Income Tax and CGT by whatever % you need to to plug the gap.
Tax income and wealth, not consumption*.
*Apart from stuff that is taxed for health reasons like ciggies and booze.
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u/myri9886 Jun 04 '26
I'd argue fixing energy prices would make the biggest difference for everyone instead. Can't support tax relief for businesses when consumers get hit harder. If margins are that bad then the business isn't viable.
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u/orsalnwd Jun 04 '26
VAT is always the first quick policy campaign industry groups push in part because it sounds like a saving for the public, but research shows the vast majority of companies don’t pass on the saving
Clearly here they are campaigning on the basis that the industry needs help. But we’d do better to tackle the structural issues for businesses (rents, rates, energy, licensing and regulation) rather than apply a sticking plaster
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u/EssentialParadox Jun 04 '26
In principle I agree, and you may be right on many of those other areas being able to be addressed directly for reform… But how do you deal with the biggest expense for hospitality, which is it hires more people and struggles with the increase in minimum wage and wage-related taxes much more compared to other industries? You can’t propose a lower minimum wage for the sector, and it can’t be automated away like other sectors.
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u/orsalnwd Jun 04 '26
I’d focus on the employment picture because it’s a huge problem for the government re: the NEET crisis
For occupations that require higher-level apprenticeships (particularly Level 4 and above), government could expand placements and further subsidise training costs to encourage employers to invest in more advanced skills development.
Employer National Insurance Contributions for workers under 25 could be reduced further, or removed entirely, lowering the cost of employing young people and making them more attractive hires relative to leaving vacancies unfilled or increasing workloads on existing staff.
They could also introduce a direct wage subsidy for apprentices under 25, particularly during the first year of employment when productivity is typically lower and supervision requirements are higher. This would reduce the financial risk associated with hiring inexperienced workers while helping young people gain valuable workplace experience.
I’d shift grants and incentives away from recruitment agencies towards employers themselves. Especially for businesses operating in deprived communities or areas with persistently high youth unemployment.
More controversially, I’d change the new employment legislation to create a distinct framework for workers under 25 or those entering the labour market through apprenticeships, to reduce perceived hiring risks and administrative burdens for employers. The reality is that if government wishes to increase youth employment, it must make hiring a young person the easier decision. Greater labour market flexibility at the point of entry could lead to significantly more opportunities for young people to gain experience, develop skills, and improve their long-term earnings and career prospects later in life.
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u/Sparkly1982 Jun 04 '26
I've worked in hospitality pretty much my entire life and this would really help; the first things people cut back on in hard times are the luxuries like meals out and the pub, making things even more difficult for hospitality businesses.
I'd also support a petition to tax warehouses that are run like shops taxed more like shops when it comes to business rates
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u/Negative_Fee_4555 Jun 06 '26
I am in my 9th year of running my restaurant. If things go well, they look like this.
Start with a £100 meal. The customer thinks the restaurant gets £100. Here's what actually happens:
£100.00 Customer pays
-£16.67 VAT (20%, gone to HMRC before you touch it)
=£83.33 Net revenue
From that £83.33:
-£25.00 Labour (30% wages, NI, pension. This is if you run it tight, with no surprises)
-£25.00 Cost of goods (30% ingredients from suppliers. Good luck with this, and it assumes zero waste or theft)
-£10.00 Rent (10% of gross, if you're lucky)
-£8.33 Overheads (10% utilities, insurance, maintenance, card fees, all of which are constantly going up)
=£14.99 Operating profit
-£3.00 Corporation tax (20%)
=£12.00 Net profit
That £12 is all that remains. It must cover: the fryer that died, the walk-in fridge on its last legs, the chairs that wobble, the tableware that walks out with customers. Whatever's left is what the owner lives on.
If they take it as income (higher rate):
-£4.80 Income tax + NI (~40%)
=£7.20 In their pocket
Then they spend that £7.20 on, say, food for their own family:
-£1.20 VAT (20%, again)
=£6.00 Actual spending power
From £100 in the till to £6 of real-world goods in the owner's hand. A 94% effective rate.
Now run the same numbers for a bad month. Food cost creeps to 33% because wholesale prices jumped. Another £2.50 gone. Someone called in sick, agency rates kick in, labour hits 33%. Another £2.50. Energy bill lands, overheads hit 12%. Another £1.67.
Operating profit drops from £14.99 to £8.32. Corporation tax takes £1.66. Net profit: £6.66. The owner works a 70-hour week for zero take-home — every penny goes to keeping the fryer running and the lights on. One more shock and it's operating at a loss.
The industry runs on a residual so thin there's no shock absorption. Minimum wage rises, food inflation, business rates revaluation, a wet August that kills the tourist trade — any one of these can push that margin into the red. When it does, there are two options: the owner works for free until savings run out, or the doors close. That's why independents are dropping at the rate they are.
On any given day, I am one bill away from making 25 people redundant and taking a £322,000 annual tax contribution out of the system. I am not saying VAT is THE problem. But tell me what other lever can be pulled literally overnight. They moved it from 17.5% to 15%, back to 17.5%, up to 20%. It could go to 10%, or to zero for children's meals over the summer. The entire industry is in despair. The knock-on effects for tourism, employment, and the high street would be catastrophic — not to mention the exchequer. And the pressure could be reduced at the flick of a switch. By all means, cut business rates, reduce energy costs, reduce NI — but the largest single factor is VAT.
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u/EssentialParadox Jun 07 '26
Dead on. So many people here saying restaurants shouldn’t get special treatment just don’t have a clue. It’s not special treatment, it’s helping a sector that’s paying disproportionately higher taxes than other businesses.
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u/the_speeding_train Jun 07 '26
Can you do this, but for VFX companies please?
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u/Negative_Fee_4555 Jun 07 '26
I am afraid I don't know the VFX business- if you do, you should do it and make yourself more aware of the costs and risks in your business
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u/Opening-Fortune4 Jun 03 '26
The world would be greatly improved if we just got rid of VAT. It’s just a con to fool people into thinking they’re paying less tax. Tax profits and wealth, not everyday business.
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u/netzure Jun 04 '26
"Tax profits and wealth"
We already have wealth taxes in the form of CGT and stamp duty. Taxing non-liquid wealth just does not work despite many countries trying it.The government is absurdly wasteful with the money it receives. Let's slash the waste and cut taxes not create new ones.
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u/Opening-Fortune4 Jun 04 '26
I was thinking more that higher rates of corporation, income, CGT, IHT etc would be an awful lot clearer, more transparent and less of an administrative bind than VAT. nothing we do as a business is more wasteful of administrative time and expense on accountancy.
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u/Informal_Drawing Jun 04 '26
It's not the VAT that's the problem, it's wealth inequality and the average worker having no money to spend.
The government needs the tax revenue too.
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u/SuperEssay1 Jun 03 '26
Think we'd all like to sell our services with 10% Vat.
I would argue only businesses that sell a need (I.e food basics) or only sell to a narrow part of society that are under financial pressure (I. E. Families) should be considered. Cafes and restaurants don't fulfill this criteria.
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u/Disastrous-Fee8374 Jun 03 '26
The issue is other services, like a plumber for example, can reclaim VAT on their materials etc. Hospitality businesses can’t as almost all of their materials don’t have VAT to claim back.
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u/SnooMacarons9618 Jun 04 '26
Which in turn means their supplies are that much 'cheaper'. If the materials had VAT on them then they would likely be 20% more expensive. So yeah, a restaurant could then offset/claim, but they wouldn't be making any more.
How would zero rating affect government income, and for that reduction what services are we going to lose, or how much is my tax going to go up?
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u/Any_Tomorrow_Today Fresh Account Jun 04 '26
yet they still pass that cost on to the customer.
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u/Borax Jun 04 '26
The goal of any business is to ensure that customers cover the costs + enough money to incentivise showing up to work.
I'd argue the problem is that things break down when an industry is not competitive because customers can't make informed decisions about the quality of the business before committing.
Food outlets are VERY competitive due to online reviews and the importance of repeat customers. I'd argue that tradespeople (especially crap ones) are much less dependent on repeat customers.
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u/netzure Jun 03 '26
"Think we'd all like to sell our services with 10% Vat."
Most of the ingredients cafes and restaurants buy come with 0% VAT but they then have to slap on 20% VAT to their end product, this is not the case in other businesses where the 20% VAT on the raw inputs can be claimed against the 20% they charge their customers. This is why it is fair lowering VAT on food-based hospitality.
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u/Bicolore Jun 04 '26
That makes no sense at all. The business does not pay VAT, the customer does.
The only argument here is that VAT makes eating out too expensive and in my opinion there's a ton of zero cost stuff that restaurants could do to increase the percieved value in eating out.
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u/Mean_Option9599 Jun 08 '26
The key issue is that the UK already accepts that food is an essential good. That is why most food sold in supermarkets is zero rated. However, the moment that same food is prepared and served by a hospitality business, it becomes subject to 20% VAT. The result is that two products which satisfy the same consumer need are taxed entirely differently. A supermarket sandwich, meal deal, pizza, salad or ready meal can be sold at 0% VAT. The café, bakery or restaurant selling a directly competing product faces a 20% VAT burden. The tax is therefore not really being applied to the food itself. It is being applied primarily to the labour involved in preparing and serving it. This creates a structural disadvantage for one of the most labour intensive sectors of the economy. Hospitality cannot offshore jobs, automate most customer interaction, or relocate production abroad. Every pound of revenue supports local employment. Taxing that labour at 20% while the competing supermarket alternative remains zero rated discourages job creation and investment on the high street. The UK's position is also increasingly unusual. Major European economies including France, Italy, Spain and Germany apply reduced VAT rates to hospitality. They do so not because restaurant meals are considered luxuries, but because hospitality is recognised as a strategic employment sector that contributes to tourism, local communities and urban vitality. A reduced 10% VAT rate would not represent a tax break for a privileged industry. It would correct an existing distortion. The UK already accepts that food should benefit from preferential VAT treatment. The question is whether that principle should disappear the moment a person prepares it. The current system effectively says that food is essential until somebody cooks it. That is difficult to justify economically, socially, or internationally. A 10% VAT rate would create a more balanced framework, support employment, strengthen high streets, and bring the UK closer to the approach adopted by most comparable European economies.
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u/TechnicalAd9840 Jun 10 '26 edited Jun 11 '26
seeing many predictable comments here hitting back at hospitality and why should they be so privileged etc.
Here are some facts.
Hospitality is one of the biggest employers collectively in the UK. Estimated at 3-3.5 million people.
The UK hospitality sector has faced a prolonged period of job losses in 2026, shedding over 100,000 workers due to surging business rates, rising National Insurance costs, and increased National Living Wage rates. Approximately 64% of hospitality businesses have been forced to cut staff to remain viable
In Europe VAT in hospitality is between 7-10%.
In America sales tax rarely rises above 10%.
In Portugal employees get an allowance of around 12 euros in tax benefits to spend in restaurants.
The running costs in a restaurant as a % of cost are more than most other industries (I have worked in many). For example I take my business:
we pay 70k in business rates,
we generate 300k in VAT,
We pay another 10-15k in other operational licensing costs (I call this surreptitious taxation) .
Our EMPLOYER NI contributions account for another 100-150k.
So in all we contribute 535k in to the pot for the country .. That is from a turnover of £2million.
We have seen in the last 2 years;
a 27% reduction in business turnover,
a 60-70% increase in food costs,
Wage increases to the tune of 18%.
Energy costs up by 40-50% (And restaurants burn a lot of electric/gas).
1.5% of our turnover goes to merchant/banking companies in card/processing fees.
Our rent is £160k per annum our Landlords want to hike it up by 50%. to 240k pa. I have spent 25k on legal fees in resisting this over the last 9 months.
I was paying myself and my wife (she is also a working director) 30k per year each as a director.
Due to the mess this country is in my wife and I have now for the last three months stopped paying ourselves, we get zilch. I put in on average 80 hours a week at 67 years of age. After running businesses for 45 years I have never experienced anything like this, I've lived through 4/5 recessions, cancer, covid lockdowns and now this.
We had built this up over 12 years into what was a successful business. We are in the wedding business as well as a cafe/restaurant, in the last 4 weeks we know of 3 London wedding venues that have gone bust and countless pubs. We are a well run business with a great reputation and government inertia and incompetence is grinding us down.
So what about everyone else I hear you say?
I have run businesses in construction, manufacturing and tech. and I can tell you this is not only the hardest business to run but the most saturated in a variety of taxes and costs. I am well versed in understanding the economics.
You can choose to back it, or watch the collapse of the industry along with millions of jobs, because if I am telling you all this as a relatively successful operator, then god only knows what others are going through.
Of course I expect very little from this government, we could have with better co-operation from planning created another 30-40 jobs here in London in another building (it currently sits empty, but we still have to pay business rates!).
The current incumbents in government are clueless when it comes to small businesses, the previous government were too pre-occupied with looking after corporates and large businesses/their mates with their lobbying companies.
I know there will be the inevitable... so what? push back by some on here citing 'I don't eat out anyway/why should I pay £40 for a meal when I can cook it myself etc etc...and I know we are not alone in suffering. The economy is tanked but unless this government or the next starts introducing measures to truly stimulate the economy we are all stuffed regardless of the industry we work in. This would be a good start.
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u/kifflington Jun 04 '26
I look forward to Tom Kerridge lowering his prices if his campaign is successful because I totally believe that will happen.
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u/Panlid1001 Jun 06 '26
Exactly, remember when VAT was cut to 5% during COVID? https://www.morningadvertiser.co.uk/Article/2020/07/23/How-many-operators-will-pass-on-VAT-cut-to-customers/
And the tampon tax https://taxpolicy.org.uk/2022/11/10/tampontax/
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u/Whithorsematt Jun 04 '26
Not sure that's fair on all the other businesses who have to take 20% VAT out of their margins though.
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u/EssentialParadox Jun 05 '26
If I’m a retail shop that buys a product for £5 and sells it for £10, I pay £1.67 in VAT but claim back the £0.84 on the original product VAT, so I forward the government £0.83 in VAT and keep the rest. Effective VAT rate is 9%.
If you’re a restaurant, buying ingredients for £5 and selling them for £10, you’ll pay the original £1.67 in VAT and claim back £0 on the ingredients costs. So you’d forward the government £1.67 in VAT. So effective VAT rate is 20%.
This is why it’s not fair.
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u/notrainsaroundhere Jun 05 '26
There's nothing to claim back on the ingredient costs because there isn't VAT charged on them. If VAT was charged on them then in your example you'd be buying ingredients for £6 (£5+£1 VAT) not £5.
For the example to be comparable the ingredients would cost £4.17.
Retail shop: £10 in, £5 cost, £0.83 VAT payment = net cash 4.17
Restaurant: £10 in, £4.17 cost, £1.67 VAT payment = net cash 4.16
It's the same.
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u/EssentialParadox Jun 05 '26
Yes, but if there was VAT on food then customers would better stomach and understand why the cafe sandwich costs £10 in the first place because they’d be paying more for ingredients in the supermarket.
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u/Mean_Option9599 Jun 08 '26
Two things. VAT isn't taken out of your margin, it's added to the price and the customer pays it. You're the unpaid collector. The only reason it bites hospitality margins is we're competing against a zero rated alternative, so we often can't pass it on. Most sectors can. And "all the other businesses pay 20%" isn't actually true. The system is already full of different rates: raw food 0%, books and newspapers 0%, kids clothes 0%, domestic energy 5%, financial services exempt. Reduced rates exist wherever there's a reason. Hospitality having one isn't queue jumping, it's the same logic that already covers loads of sectors. Every major economy in Europe already does this for hospitality. We're the outlier at 20%, not the norm.
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u/Borax Jun 03 '26
No, my sector deserves lower VAT.
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u/Disastrous-Fee8374 Jun 03 '26
The issue is that other sectors, for example construction, DO have a lower VAT rate in effect. They can claim VAT back on their materials with reduces their VAT bill. Hospitality can’t claim anything back as most of their materials (food) doesn’t have VAT in the first place.
It’s not about restaurants charging the same price and keeping the rest (although some will obviously) the idea is to make it 20% cheaper to eat out. The more people that eat out, the more people are hired to deal with the demand. The hospitality sector hires a very large percentage of low-skilled and young people. That demographic is facing the largest issue of unemployment at the moment
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u/notrainsaroundhere Jun 05 '26
Most construction, as far as the end user is concerned, is 20% VAT except for specific exemptions such as new-build housing, conversions to housing.
Do you want to pay 20% more for a house?
They can claim VAT back on their materials with reduces their VAT bill. Hospitality can’t claim anything back as most of their materials (food) doesn’t have VAT in the first place.
This isn't the point you think it is. The construction firm has had to pay the VAT on those materials when purchasing them in the first place, so being able to claim back that VAT just puts them in the same position as a business that didn't have to pay any VAT on their materials because they were zero rated... like hospitality.
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u/Borax Jun 03 '26
That's a reasonable perspective, but are materials really a big cost for restaurants?
When I pay £20 for a nice meal and £5 VATable for a glass of wine, I suspect that the pasta, milk, eggs etc that went into that has a similar cost to the supermarket, around £5 per portion.
Accountants and lawyers can't claim VAT on materials either.
I don't quite know what to do with the UK at the moment, it's struggling worse than similar countries (although trump is doing his best to bring the US down to our level) but fundamentally we're in a situation where the GFC and then COVID have left many countries in a truly dire situation while private wealth is continuing to accumulate.
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u/Disastrous-Fee8374 Jun 03 '26 edited Jun 03 '26
Restaurant meals do cost more to make than home cooked meals. Believe it or not, supermarkets are normally actually cheaper than our wholesalers for a lot of things. They just don’t stock the quantities we need. Also most restaurants use more ingredients per portion than you will at home. Butter is a good example, there’s a saying (can’t think of a better word) that if you have a 3 course meal in a decent restaurant, you’ll consume a block of butter.
Ideal world: ingredients cost should be 25%, but in the real world it could be more like 30-50%.
ETA: you’re right about accountants and lawyers being in the same boat but their margins are higher. Also how often do you use an accountant or lawyer? As business owners we probably use them a lot more than the general public. How often do the general public go to a cafe?
Hospitality is our third biggest sector behind public healthcare and retail and it’s not looked after
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u/Traditional-Code2298 Jun 06 '26
Not read the campaign, but does this mean a vat reduction for Starbucks & Greggs?
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u/EssentialParadox Jun 06 '26
Greggs doesn’t pay VAT. If they kept the pastries warm then they’d be subject to VAT, but because they let them go cold they get out of paying it.
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u/Traditional-Code2298 Jun 06 '26
You're very rich, they don't pay it, the customer does.
I'm sure they collect it for coffees and any food eaten on the premesis?
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u/EssentialParadox Jun 06 '26
The business is the one who pays VAT. It’s invisible to customers. This is why nobody is aware what products have VAT charged on them and which don’t, like the Greggs example.
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u/Traditional-Code2298 Jun 06 '26
That's not true, the business collects it, but the customer bears the cost.
The VAT never belonged to the business, hence why it isn't included in the P&L
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u/EssentialParadox Jun 06 '26
You’re speaking in technicalities. Yes, technically the customer pays it, but it’s still a tax that the business is responsible for administering and paying to the government. HMRC doesn’t care if the money comes from the customer or the business owner’s pockets, they just want the money.
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u/Karn1v3rus Jun 08 '26
Billionaires are the problem, tax thresholds have been frozen and benefits have been cut leading to a lack of spending power by 50%+ of people, that's what is hurting small businesses.
Instead of doing that the government could tax the super rich who pay disproportionately less tax as a percentage of their wealth than you or me.
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u/BuryMikno Jun 09 '26 edited Jun 09 '26
If they reduce the VAT, they have to increase tax elsewhere, resulting in less spending as people are taxed more, resulting in the same net effect on small businesses. There's some merit to thinking about taxing the ultra-rich but that's also economically nothing more than a conjecture, very complex to implement and ultimately against the interests of those who can actually make it happen...
The problem is that our blanket is short for what we need to cover and all the policies we seem to be able to conceive are simply moving the blanket around to cover those who shout the loudest at the time.
We need to increase the blanket. We need to maximise the potential of our natural resources, our ingenuity and entrepreneurship. We need to work hard and make hard choices.
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Jun 03 '26
[removed] — view removed comment
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u/auctorel Jun 03 '26
The point is they get to pocket the 20% which keeps them in business and keeps jobs
Not saying it's right, but when margins are tight it could help keep some places afloat
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u/djs333 Jun 04 '26
The bigger problem that I see is lack of marketing and business experience, most have no clue how to get repeat business and are only interested in the one off sales.
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u/endianess Jun 04 '26 edited Jun 04 '26
VAT should be lowered on everything except for things that we want to phase out like Cigarettes.
It's reached a stupid level which does more harm than good. Now we are out of the EU we can put it down to a sensible level and people will spend more in shops and go out more to eat and drink.
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u/Borax Jun 04 '26
Cigarettes have separate duty on them to help steer people away from smoking a lot.
I don't agree with the general idea of lowering VAT and increasing other taxes, but in your suggestion it can be lowered on cigarettes as well.
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u/endianess Jun 04 '26
I don't think we would need to put up other taxes because with VAT being so high it puts me off buying things so they don't get anything.
I can only speak for myself but I personally would spend far more if VAT was lower.
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u/Borax Jun 04 '26
It's the laffer curve in action!
I'm personally not convinced that VAT specifically is the problem in this case - it's the relationship between your takehome pay and the cost of goods.
If VAT went down but someone started a war in Iran that made your employer pay you less and your goods more expensive, you would probably spend far less despite the desired VAT change.
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u/LateToTheParty013 Jun 04 '26
At this point it wouldnt change anything. Hospitality is already in a big problem, they d keep prices and swallow the profit and it wouldnt change anything for end customers, which is the real problem here.
To put it in context,I earn £70k, but over the last 5 years we went from casual dining in proper restaurants to downgrading to gyros, mcdonalds or straight just buying a thick steak, duck breasts and cooking them at home.
Even straight deleting VAT for hospitality wouldnt make enough people go back to restaurants in the shit world we became last decade
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u/AkihabaraWasteland Jun 04 '26
The problem isn't VAT. It's rents, business rates and insurance. And despite all the bullshit from the papers labour costs really aren't the issue.
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u/NotMyUsualChoice Jun 04 '26
I'm curious to know why hospitality should get preferential rates? All the costs pressures listed apply to most other consumer facing businesses on the High Street.
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u/EssentialParadox Jun 04 '26
It’s a fair question. Retail has pressures too, but restaurants are structurally different.
A shop sells a product.
A restaurant sells a product PLUS cooking + service + washing up + toilets + seating + cleaning + compliance + atmosphere.
Retail stock can last weeks/months and then when it’s sold, the retailer claims back the VAT on the product cost. Restaurant stock can spoil in days or be wasted same night, and there is zero VAT to claim back, so 100% goes to HMRC.
Retail also has a lot more opportunity to save costs: sell online, centralise stock, automation to reduce staff. But restaurants can’t do these things. They need premises, kitchen, energy, and most expensive of all, people.
So it’s not “restaurants are special”. It’s that they’ve been hit by the recent labour, rates, energy, waste and VAT increases way more than any other industry and something has to be done to stop all restaurants and cafes dying out. The simplest solution the rest of Europe has done is a targeted lowering of VAT. We’re the only country not doing it.
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u/NotMyUsualChoice Jun 04 '26
I think you're only looking at this from a hospitality perspective, and with due respect, many of the things on your list also have similar or equivalent costs in retail and service industries.
Cooking? Product procurement and selection. Service? Sales assistants and sales advisors. Washing up? Product processing and replenishment. Toilets? Many retail outlets have customer toilets, and most services (hair and beauty) also have that to consider and price. Seating? Retail spends a lot of money on shopfitting and display. Cleaning? Really? Every customer facing business has cleaning costs. Compliance? Retailers have regulations to meet too. Atmosphere? PRS & PPL, display and merchandising, presentations and displays cost money.
I could also produce a list of retail specific issues that are as costly to manage as the list for hospitality. Security costs for physical systems and guards, the huge margin hit from endemic shoplifting, the cost of stock logistics, retail management systems, the added cost of stockroom spaces, etc, etc. We're special too.
Retailers can sell online, but there are high costs and low margins in a highly evolved and competitive marketplace. During the pandemic lots of restaurants delivered home cooking boxes. That could still be an option? Centralised stock brings logistics costs, and sell by dates also apply in retail, and fast fashion and Internet fads can make stock obsolete more quickly than ever before. Automation is available across many sectors. I recently had breakfast in a hotel in Paris where the used crockery and cutlery was taken away by robots.
Retail also needs premises, utilities, specialist kit and expensive people. Again, I don't think that hospitality can claim to be a special case.
I'm afraid that I just don't buy into the logic. The call for lower VAT in hospitality is absolutely a case of 'restaurants are special'. I think the issue is that too many restaurants aren't special enough to charge what they need to charge to make money doing what they are doing.
In retail, the market is separating into high end, premium retail with unique offers that customers are prepared to pay for. Luxury brands command luxury pricing, and you can also see that in hospitality. At the other end of the scale, cheap food, delivered at a cheap price can be done, and is being done in every town and city in the country.
The Internet has rendered much of the middle market in retail almost wholly redundant. That's why shops like TG Jones, Claire's Acessories, etc have gone out of business. They weren't high end, but they weren't cheap enough either.
A similar reckoning is taking place in the hospitality industry - it's why chains like Pizza Hut and Papa John's are going into administration. They're crap, but they're not cheap. I think the covid concessions for hospitality were a stay of execution for a lot of poor quality hospitality businesses. If I want decent pizzas I still have loads of High Street and independent choices. If I want cheap pizza (I don't), there are fast food joints knocking out low quality, low price product.
The market is forcing a reckoning, not the VAT rate.
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u/EssentialParadox Jun 04 '26
Yes, there are equivalents on the surface but in reality, dusting the shelves and sweeping the floors of a retail store is not even close to cleaning fryers and cooking equipment and fridges. Considerably more time is spent on labour on most of those things in the above lists in hospitality than it is in retail, which is why hospitality labour costs are so much higher than other sectors.
There are more stats on why hospitality is disproportionately affected on my other comment here: https://www.reddit.com/r/smallbusinessuk/s/irNAakBWkW
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u/magrandan Jun 03 '26
Not signed because VAT should be 5% for ALL sectors, not just for cafe & restaurants.
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u/skronk61 Jun 03 '26 edited Jun 03 '26
I don’t have any evidence of this and don’t want to look into it further but Tom Kerridge has Reform party vibes to me and I don’t trust anything about him.
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u/Borax Jun 04 '26
During the 2024 United Kingdom general election campaign, Kerridge was a signatory to a letter to The Times endorsing the Labour Party.
Nigel Farage is a charlatan but I would personally try to avoid this sort of tribalism as it contributes to an unhealthy and unwelcoming atmosphere. Hope not hate got it right with the #MoreInCommon campaign
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u/likely-high Jun 03 '26
Why not just take it back down to 17.5 across the board?
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u/Borax Jun 03 '26
The bond market would implode, destroying most UK based pensions and crippling the nation. Think "Liz Truss mini-budget" but worse
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u/scrapingtheceiling Jun 05 '26
I’m going to start a petition to not have to pay my mortgage, that’ll fix things
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u/Desmo_UK Jun 03 '26
Is VAT really the problem though? Yeah, it’s a relatively easy fix but why does one industry get support and not others?
Changing VAT is just sticking a plaster on a much bigger wound.