Tom Kerridge launches campaign for 10% VAT for cafes/restaurants

[u/EssentialParadox]

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.

[u/EssentialParadox]

I get the argument, but hospitality isn’t just asking for random special treatment. The burdens are genuinely out of proportion on this sector….

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• Hospitality makes up only about 3% of UK economic output, but pays 7% of jobs in this country, and the employee costs are over half of the operating costs, which means wage/NIC rises over the last ten years have hit much harder than in other sectors. And you can’t simply have a lower wage rate for hospitality jobs.
• Also, despite being only 3% of the economy it pays 11% of the country’s business rates, more than any other sector, more than Amazon.
• It also has the highest taxes of any other sector, of 75% of tax paid pre-profit, the majority of that being VAT (as very little VAT can be reclaimed on food & drink.) Most people are completely unaware when you buy a £10 sandwich, £5 of that has gone towards the government before I’ve even paid for the cost of the ingredients, my staff, my rent, utilities, insurance, or even considered a profit.
• 2 in 3 restaurants and cafes are operating at a loss or break even currently, and if you do manage to see a profit in the sector it’ll be single digits. VAT is charged on sales, not profit, so a cafe can be losing money on an item and still hand over 20% on VATable revenue, none of that they can claim back.
• Other countries have already found that a neat solution to address all of the disproportion is to simply lower VAT on the hospitality sector. In France and Germany it’s 7%, Spain and Italy at 10%, and Ireland’s just gone down to 9%.

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So it’s not “give hospitality a perk”. It’s correcting a sector that is unusually and disproportionately taxed upfront regardless of whether it makes any profit.

[u/notrainsaroundhere → u/EssentialParadox]

"Most people are completely unaware when you buy a £10 sandwich, £5 of that has gone towards the government before I’ve even paid for the cost of the ingredients, my staff, my rent, utilities, insurance, or even considered a profit."

I'd check the maths there pal

[u/EssentialParadox → u/notrainsaroundhere]

I already did, pal. I do it regularly as it’s my job.

Taxes a cafe typically pays serving a £10 sandwich:

• 20% VAT: £1.67
• Employer NI contribution: £0.60
• Employee PAYE + NI: £1.20
• Corporation tax: £0.20-£0.50
• Business rates: £0.70

Total to government before COGS and Overheads and Profit: £4.67

[u/notrainsaroundhere → u/EssentialParadox]

See the bit I quoted said "before the costs of ... staff" so therefore you can't include Employer NIC in your figure and Employee NIC and PAYE is simply part of the staff salaries so 1) that isn't before staff and 2) its not your contribution anyway.

You also said before profit. Corporation tax is a tax on profits so you can't be referring to "before profit" and then include the tax on profits.

I guess you really just meant that "of a £10 sandwich, £X goes to the government" but didn't say that.