To Implement a permanent 5% VAT for Hospitality on Food, Drink and Hotel Rooms

To Implement a permanent 5% VAT for Hospitality on Food, Drink and Hotel Rooms

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Jason Shadlock started this petition to and

This petition calls on the Rt Honourable Rishi Sunak - Chancellor of the Exchequer, Boris Johnson - Prime Minister of the United Kingdom, Rt Hon Elizabeth Truss MP - Secretary of State for International Trade and President of the Board of Trade,  & Rt Hon Kwasi Kwarteng MP - Secretary of State for Business, Energy and Industrial Strategy to review our taxation system in the UK with a focus on reducing the VAT tax burden on Food and Drink for Hospitality sector.

The Chancellor of the Exchequer reduced the VAT to help the hospitality sector recover from months of being locked down during the pandemic.

Whilst this was very much needed for a sector that in 2019 contributed £59.3 billion in Gross Value Added to the UK economy, around 3.0% of total UK economic output. In the three months to September 2020, there were 2.38 million jobs in the hospitality sector in the UK, representing 6.9% of total UK employment. The taxation system in the UK remains unfair and a real burden to the hospitality sector.

Taxes in the hospitality sector in the UK are higher than most European countries at the standard 20% standard rate across food and drink whilst in Spain you'd pay 10% for most drinks and hotel services and just 4% on food. In France you'd pay 5.5% VAT on food and non alcoholic beverages. In the US, sales tax on food and drink varies but is between 4% & 7%.

The current reduction in VAT is about to change with the first increase due at the end of September.

To simplify what we are trying to achieve in the permanent reduction in VAT and what this would mean for the sector is:

A food item purchased in a supermarket costing £5.00 with zero VAT, may have a profit margin of £2.50. A similar priced item in a UK restaurant would be subject to 20% VAT which means that £1 is payable in VAT. That similar priced item now carries a profit margin of just £1.50. Yet this item will have been prepared fresh by staff, cooked, brought to your table. The food being cooked will have used gas or electricity to prepare. The plate will be taken away by a staff member and the plate washed and dried for further use. 

Different tax levels for the same product type does not work, especially when the product is prepared by staff rather than machines in an industry with high overheads.

Over 1400 businesses in hospitality failed to June 2019. For the year 2020-2021+, the figure is said to be much higher. Increased minimum wages, workplace pensions, energy and wholesale costs but a ceiling to what customers are willing to pay has squeezed margins to a minimum, if indeed they are available at all resulting in business failures.

We are calling on our government to urgently review the tax system for the hospitality sector to achieve the following outcomes and prevent further diminishment of the sector.

1. Taxation on food and drink at different levels and across different sectors is unfair and does not work for business and we urgently ask the Chancellor and wider UK government ministers for trade and industry to support the implementation of a permanent reduction in VAT and not to implement the scheduled increases on the 30th September 2021 and March 2022.

Whilst consumers will often pay zero on food in supermarkets, the hospitality sector carries a significant tax burden on prepared and served food. Unlike factory produced meals, fresh food production in hospitality is labour intensive and more costly to produce. 

Therefore maintaining the reduced 5% tax across the hospitality sector for certain goods will mean increased profits, increased employment, better services, better working conditions and pay for employees and reduced closures.

2. Level the playing field to ensure that the hospitality sector tax structure is not only competitive and comparable to other sectors for similar items but also on the European and Global stage too.

3. Enable the hospitality to address the staff shortages which the sector is currently suffering and hindering its recovery. The hospitality sector needs to be able to look to improve the work life balance and improve wages of many of its workers.

Poor pay and work life balance is the number one reason that many workers have left hospitality altogether, finding work in other sectors whilst on furlough. We need to be able to attract talent back to the sector.

4. A permanent reduction to 5% VAT increases margins for the sector, transforming the bottom line. The 20% VAT burden contributed to the sector being on its knees during the worst of the pandemic and national lockdowns and the continued business closures that we've seen year on year. 

What this means for you signing the petition.

It means that the hospitality sector remains a fantastic and significant part of our economy.

It would mean greater employment, better wages and conditions. a sector which is more robust to future challenges. National lockdowns just demonstrated how fragile the sector is with many businesses closing for good.

Longer term it means that our country and hospitality sector remains attractive to overseas visitors from around the world, a robust and expanding sector contributing a significant amount to our GDP as well as significant levels of employment, better wages and reduced closures.

By signing this petition you are not only helping us to change an unfair tax system for business but you are supporting the development of the wider cultural changes and better wages for which many still remain on the poverty line or dangerously close to it.

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