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VAT TALKING POINTS

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A few of you have asked us to put together some talking points to help you talk to your local MP about an extension to the 5% VAT reduction on hospitality.

We have broken it down into two parts, an extension of 5% and reform of VAT.

For more information about VAT, we have added some links below, but it’s also worth listening to Episode 80 of the Ceres Podcast with Kate Nicholls, CEO of UK Hospitality. Their work throughout this pandemic has been invaluable.

We have put together a guide to writing a letter to your MP and, if you need a little more help, we have put a free template in the digital download area in the shop (no purchase necessary).

Arguments for an extension of VAT 5% to support businesses:

The reduction of VAT to 5% has been a massive lifeline to the hot food, restaurant and takeaway industry. Don’t imagine that these vendors are making a fortune right now because the truth is they are doing one of the following with the VAT reduction:

Setting it aside for a rainy day.

Paying off bills they have accumulated over covid.

Subsidising higher costs with delivery, click and collect or if a restaurant is serving fewer covers than they are used to, or able to.

Client Comment: A huge proportion of walk in sales have now shifted onto delivery since the pandemic, this is a trend that will continue and represents a huge problem as business struggle to make a profit from this massively in-demand channel. If we chose to ignore this channel we will be picked off by the aggregators that are growing in dominance and when used are also taking a huge chunk of profits through commissions.

It is clear that:

The 5% VAT is a lifeline for many hot food takeaways and restaurants.

Where Eat Out To Help Out helped consumers, the 5% VAT does help the business owner in these times.

It has shown that with VAT at a lower rate, hot food businesses (takeaway or restaurant) can bounce back and thrive and prop up the economy faster.

Arguments for reform:

We understand the contribution of VAT to the economy. We are not asking you to ruin the economy for hot food sellers, whether restaurants or takeaways, but to understand that regardless of temperature, hot food is unfairly penalised for being hot.

Consumers today are time poor and depend on eating hot food either in takeaway or in restaurant form a couple of times a week. You can see this trend with ambient and cold food; people buy sandwiches, salads, sausage rolls for work – all VAT free – when all of these could be made at home for much cheaper.

These two meal types have one thing in common – convenience. And yet only one part of it is being rated at 20%.

We believe that reform of VAT is much needed. We are genuinely convinced that dropping the VAT rate to 5% (or keeping it as it is) and adding it to all “out of home food” or “all prepared foods hot all cold” could make VAT a more significant tax for The Treasury. On top of this, it would be a fairer and easier to understand tax in line with 2020, instead of having the issues of the pasty gate a few years back.

Now is the time to make the system fairer as restaurants and hot food takeaways mostly carry this burden disproportionately.

Talking points:

🔺Before the covid pandemic 20% VAT was a ridiculous figure because it was so hard for food business and hospitality to manage. This makes The Treasury the business silent partner that always gets paid. Whereas the partner who does all the work, takes on all the risk and employs all the staff is left with the thin wedge.

🔺Businesses that collect and pass on VAT are essentially tax collectors that work for free. No admin fee is given to the businesses for handling all this money before passing it on to HMRC.

🔺The problem with VAT specifically on fish and chips is that in most areas the price dictates what you can charge, so VAT has to be squeezed out of the margin. It’s very different from buying a mobile phone or TV, which is generally plus VAT.

🔺To some degree, it is similar to restaurants and wider hospitality, although they don’t tend to have a ceiling price like fish and chips does. No doubt they have other contributing factors to their pricing, including increasing rents and employee costs.

🔺 You may be aware that VAT is applied to hot food takeaway because it is a ‘luxury’, but I can buy an ambient or cold sandwich or salad from the supermarket which has no VAT. In our view, that sandwich or salad should also be considered a luxury because it is something that could have been made at home.

As an example, a cold sandwich from Subway costs from £4-£7 and with that money I could also buy a loaf of bread to make enough sandwiches at home to last a week.

The concept of “luxury” is broken and doesn’t fit into today’s living terms.

🔺Eating hot food in this day and age is not a luxury. With both parents in many households working, British working hours and social structures consumers have become dependent on food cooked out of the home to ease the burden. To tax them 20% for the benefit is scandalous.

🔺The threshold of VAT is £85,000. This figure allows many to earn up to that without being VAT registered. This causes issues because it essentially means that smaller businesses can be 20% cheaper and still make the same profit, so it has created a two-tier system.

We understand that this threshold is there to make it easy from an accounting point of view, but it is a system which penalises businesses for being successful, and this doesn’t add up in a country like the UK. Ideally, a fair playing field is needed here.

For more information about VAT, we have added some links below, but it’s also worth listening to Episode 80 of the Ceres Podcast with Kate Nicholls, CEO of UK Hospitality. Their work throughout this pandemic has been invaluable.

Sending a letter or e-mail to your MP is a perfect way of helping UK Hospitality do their work at the top from central government whilst you lobby your MP from the local level.

We have put together a guide to writing a letter to your MP and, if you need a little more help, we have put a free template in our digital download area in the shop (no purchase necessary).

Further reading:


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