---

Restaurants: VAT

Answer

The Government recognises the significant contribution made by hospitality businesses to economic growth and social life in the UK.

VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. VAT is the UK's second largest tax, forecast to raise £180 billion in 2025/26.

Where restaurants incur VAT in producing the food they sell, this can be claimed back in the normal way, provided that they are registered for VAT. Businesses with a turnover below the £90,000 per year threshold may choose not to register for VAT, in which case they do not charge VAT on their sales and cannot reclaim it on their input costs.

HMRC estimate that the cost of a 5 per cent reduced rate for accommodation, hospitality and tourist attractions would be around £13 billion this financial year. If the scope were also to include alcoholic beverages, the cost would be approximately £3 billion greater.

More broadly, as announced at Autumn Budget 2024, the Government will introduce permanently lower business rates multipliers for retail, hospitality, and leisure properties with rateable values below £500,000 from 2026/27. This permanent tax cut will ensure they benefit from much-needed certainty and support.

Secondary information

Type

Written question

Reference

88675

Session

2024-26

Subjects

VAT Restaurants

Link

View this Written question on www.parliament.uk