Hospitality needs 10% VAT. Here’s the case, including the hard part

Short answer: UK restaurants, pubs and hotels charge customers 20% VAT, while France, Spain and Italy charge 10% (Startups). The #VATsTheProblem campaign wants a permanent 10% rate. Its petition passed 400,000 signatures on 12 October (Morning Advertiser). The Treasury's objection is cost: about £11bn a year (UK Parliament petition response). The case is worth making. To win it, the sector has to answer that objection, not shout over it. The Budget is on Wednesday 28 October.

We supply fuel to professional kitchens across the UK, so we see this from the supplier side. When a restaurant's margin goes, it cuts back on everything: fewer covers, a shorter menu, the grill only lit for weekend services. Then, too often, it shuts. That's why we're putting our name to this.

What the campaign is asking for

#VATsTheProblem launched in June, fronted by Tom Kerridge. It's backed by UKHospitality, the British Beer & Pub Association, the British Institute of Innkeeping and CODE Hospitality. It has one ask: cut hospitality VAT to 10%, in line with Europe.

UKHospitality's Budget26 campaign puts the same cut first among four asks to Chancellor John Healey. It would cover paid visitor attractions too. The other three are further business-rates reform, a higher employer NIC threshold, and replacing tourist taxes with devolved funding (The Staff Canteen).

Support has spread well beyond the trade bodies:

• More than 800 hospitality businesses signed an open letter asking Prime Minister Andy Burnham to deliver a lower rate. As Mayor of Greater Manchester he had publicly backed one (Morning Advertiser).
• The Scottish Government has written to the UK Government urging it to "introduce a 10% VAT rate for hospitality across the UK". Signatories to the letter that prompted it included Tom Kitchin, Lorna McNee and the Balmoral (UKHospitality).

Why it matters on the pass

The pressure isn't abstract. These are the numbers operators are working against:

The clearest example came from Wahaca CEO Gemma Glasson. On a £7.95 pork belly taco, she said, the restaurant makes 20p profit and pays around £1.59 in VAT, "roughly ten times its margin" (The Staff Canteen).

That's the core of the argument. Most of a restaurant's cost base is labour, energy, rent and fresh food. Much of that carries little or no input VAT for the business to reclaim. A retailer selling a product has input VAT to offset. A kitchen turning raw ingredients and hours of skilled work into a plate mostly doesn't. So 20% lands harder on a meal than on a boxed product at the same price.

The hard part: £11bn, and who gets it

There's a fair objection here, and pretending otherwise weakens the case.

The cost. HMRC estimates a 10% rate on accommodation and food and beverage services would cost about £11bn a year. The Government's response compares that to the annual Child Benefit bill, the whole Royal Navy budget, or a 1p rise in standard-rate VAT (UK Parliament petition response). Treasury minister James Murray said any cut must be "fully funded" (Restaurant Online).

The distribution. Tax Policy Associates has done the most detailed work on this, and makes three points:

• About 45% of hospitality businesses sit below the £90,000 VAT threshold. They get nothing directly.
• Firms with 250 or more staff would take around £4.85bn of the £10.5bn core cost.
• Once businesses outside hospitality try to reclassify into the lower rate, the real bill could be £12–14bn.

The gap. The campaign hasn't published its own costing (Tax Policy Associates). "It will pay for itself" is a claim the Treasury will test, not take on trust.

None of this makes the case wrong. It means the sector has to say how a cut would work, and what operators would do with it.

How to answer it

A stronger version of the ask, built from the evidence above:

1. Show where the money goes. A cut is easier to back if the sector commits to reinvesting it in visible ways: jobs, apprenticeships, wages, menus and prices. The summer scheme proved some of it gets passed on. Haven returned around £4m to holidaymakers under the 5% rate on kids' meals and family attractions (Startups).
2. Draw the boundary tightly. Define hospitality narrowly: food and drink served for eating on the premises, plus accommodation. That stops the leakage that pushes the bill towards £14bn (Tax Policy Associates).
3. Count what's already being lost. When a venue closes, the Treasury loses its VAT, PAYE, business rates and corporation tax all at once (UK Parliament petition). Losing 1,839 venues in four months has a fiscal cost too.
4. Point to the precedent. The Government has already used VAT as a hospitality lever this year, with the Great British Summer Savings scheme (UK Parliament petition response). As Kerridge put it, the government "has now recognised that VAT is the lever to pull" (Startups).
5. Keep the other asks in play. Many small operators below the VAT threshold are hit hardest by business rates and employer NICs. Backing UKHospitality's full package covers them too (UKHospitality).

What to do before 28 October

• Sign the petition at vatstheproblem.co.uk, and ask your team to sign too.
• Write to your MP with your own numbers: covers, staff, margin per dish, and what you would do with the headroom. A real P&L line from a real venue carries more weight than a national statistic.
• Use the campaign toolkit. Put the QR code and assets on menus, receipts and socials (Harpers).
• Tell the story in pounds, not percentages. Glasson's taco example travelled because anyone could follow it.

Where we stand

We're a supplier, not a lobbying body, and we'll be careful with our claims. But every grill we keep lit belongs to a business with a P&L, a team and a landlord. We'd rather see those businesses invest in their kitchens and people than spend the next year deciding which service to cut.

We back 10%. We also think the case wins faster if the sector meets the cost question head-on.

FAQ

What is the #VATsTheProblem campaign? An industry campaign fronted by Tom Kerridge and backed by UKHospitality, the BBPA, the BII and CODE Hospitality. It calls for UK hospitality VAT to be cut permanently from 20% to 10% (UKHospitality).

How much would a 10% hospitality VAT rate cost? HMRC estimates about £11bn a year (UK Parliament). Tax Policy Associates estimates £12–14bn once businesses trying to reclassify into the lower rate are included (Tax Policy Associates).

What VAT do other European countries charge on restaurants? France, Spain and Italy charge 10% (Startups). The campaign says Ireland's rate is now 9% (UKHospitality).

When is the decision? The next opportunity is the Budget on Wednesday 28 October 2026 (The Staff Canteen).

Would small restaurants benefit? VAT-registered businesses would. Those below the £90,000 threshold already charge no VAT, so they would gain nothing directly. That's why business-rates and NIC reform matter alongside the VAT cut (Tax Policy Associates).