Hospitality firms criticise temporary VAT cut for children’s meals

The UK Government has recently announced a temporary reduction in value-added tax (VAT) for children’s meals and tickets to theme park attractions, cinemas, concerts, exhibitions, and shows.

Announced last week, the VAT rate will be slashed from 20% to 5% from 5 June to 1 September.

However, hospitality firms – particularly restaurant businesses – have been quick to criticise this latest move, expressing concern that the reduced rate on VAT isn’t enough to support struggling businesses, and that it’ll do more harm than good. 

What is the temporary VAT reduction?

The Government’s temporary VAT cut is designed to help families afford the summer holidays by reducing the cost of eating out and visiting popular attractions.

As part of the Government’s “Great British Summer Savings” scheme, VAT reduction will apply to children’s menus in restaurants, as well as tickets for the cinema, theatre, amusement parks, museums, zoos, soft play centres, and more.

However, the reduction will not apply to meals marketed as smaller portions, lower-calorie options, discounted versions of adult meals, and shared meals intended for both adults and children.

Kate Nicholls, Chair of UKHospitality, describes the move as a “positive step to help families enjoy a great British break this summer”, but has called on the Government to reduce VAT for the entire industry.

“VAT is the single biggest lever it can pull to lower prices, tackle inflation, drive demand, boost spending, generate growth and create new jobs”, she said. “I would urge [the Government] to be bold and cut VAT for the entire hospitality sector.”

Why are hospitality businesses unhappy about the VAT cut?

Not everyone in the hospitality sector has welcomed the announcement, with many operators arguing that the measure is too limited to have any meaningful impact on businesses or consumers.

Ed Bedington, editor of the Morning Advertiser, writes that the new move is “as much help as a paper raincoat”. He also criticised the Government’s apparent lack of guidance, advice or rules, and that the effort of having to amend the tills and working out which proportion of the spend was from the children’s menu isn’t worth the time or hassle.

“For those operators that think, great, we can keep the 15% saving on the meagre amount of kids meals we sell, good luck – parents will be flocking to your venues expecting that 15% discount on little Timothy’s nuggets and chips,” he added.

Restaurant businesses have also mirrored similar concerns. Will Murray, owner of London restaurant Fallow, told The Guardian that the move “won’t make any difference” and that “most kids’ food is already discounted at the cost of the restaurant anyway: the VAT cut wouldn’t even make up that shortfall”.

Meanwhile, London pub Blue Stoops launched a “grown-up” children’s menu to protest the news. Dishes include wild Burgundy snails, anchovy butter toast, beef and oyster pie, a dessert called “the tax break tart”, and half a pint of zero-alcohol beer. The menu will be priced at £25, including the reduced VAT rate during the relief period.

Jamie Allsopp, founder of Blue Stoops, comments: “The hospitality industry has been crying out for cuts to VAT to support an industry that has been hammered in recent years, so while this move is of course welcome, it does not go far enough.”

How hospitality businesses can prepare for the VAT changes

While these new measures are intended to encourage consumer spending over the summer, it also means most hospitality businesses will need to make operational changes at short notice.

With the reduced VAT rate applying to eligible items, operators will need to ensure their tills and pricing systems are updated ahead of June 5th. Businesses will also need to determine which menu items qualify under the rules, particularly where children’s portions overlap with standard or discounted menu options.

Additionally, clear communication with customers will be important to avoid confusion around what is – and isn’t – covered by the scheme.

For example, this can be social media posts ahead of the date, clear in-venue signs explaining which items qualify for the reduced rate, new FAQs on the business website explaining how the scheme works and what’s included/excluded, and till receipts or order confirmations showing the reduction where applicable.

For many businesses, the hope will be that the scheme encourages more families to dine out over the summer months. But whether the savings are enough to make a real difference – for either consumers or operators – remains to be seen.

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Planet of the Grapes founder Matt Harris has over 25 years of experience in hospitality. Read his bi-monthly column for Startups now.

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