UK: EU exit to see VAT cut on beer on January 1

Breaking free from the EU on January 1 will allow UK ministers to throw traditional pubs a tax cut lifeline, industry chiefs said.

Chief executive Emma McClarkin said: "The existing VAT cut on food and soft drinks does nothing to help those pubs who rely on beer sales for their revenues, and it’s important to remember that seven in ten of all alcoholic drinks sold in pubs are beer.

“Once the UK is no longer bound by EU structures on tax the Government can take the simple step of extending the cut to cover beer sold in pubs as well.

"This would be a huge boost to those pubs that have been singled out for extraordinarily harsh treatment under lockdowns and tier systems.”

Ms McClarkin said coronavirus restrictions have left pubs facing their worst December on record “by a distance”.

“If we want there to be pubs for us to come back to once this crisis has passed they need help - and they need it urgently.

“Cutting VAT on beer sold in pubs is a small cost for the Government but would be a major boost to our brewers and pubs to the tune of £130 mln, just when they need it most."

Chancellor Rishi Sunak cut VAT from 20 per cent to five per cent for the hospitality sector until March 31 as part of a package of measures to support some of the hardest hit businesses during the coronavirus crisis.

It covers food and non-alcoholic drinks, accommodation and admission to tourist attractions.

But the EU’s VAT Directives limits flexibility on reduced rates and prevents the tax being cut on alcoholic drinks sold in pubs.

The BBPA wants the reduction to be extended until 2022 and applied to all drinks sold in pubs.

As well as supporting struggling venues, it says the move would also help brewers and the wider supply chain.

And it argues a cut would also go a long way to ensuring a pint in the pub remains affordable for hard-pressed customers in the new year.

An average pub is expected to lose £47,000 in revenue this month (DECEMBER), which would usually be the busiest trading month of the year.

Phil Whitehead, managing director of Molson Coors Western Europe, said pubs need a new package of financial support of grants and VAT cuts.

He said: “My big fear is that when the vaccine has been successfully rolled out we are going to have a nation that’s all dressed up with nowhere to go.

“If they provide an economic bridge through to Easter, things like a VAT cut would be self-financing for the Chancellor because he gains a lot of revenue on that as consumers go back out.”

Chancellor Rishi Sunak has announced his next budget will be on March 3.

MPs urged him to look at using the new freedom the government has after Brexit transition arrangements have ended.

Former Business Secretary Andrea Leadsom said: “The government will have the freedom after the end of the transition period to help businesses much more flexibly, including through targeted cuts in VAT that would not be possible if we were still in the EU.

“I think the chancellor will be looking carefully at how he can help turnaround our hard hit hospitality sector.”

Conservative MP Andrew Bridgen said: “These are just a sample of the measures a newly sovereign and independent UK could do to revitalise our pubs and hospitality industry once we are finally out of the clutches and control of the EU

“I think we should all drink to that.”

Brexiteer Tory Peter Bone said VAT powers will be a “clear Brexit benefit”.

He said “It’s one of the advantages of coming out of the transition period. We will be able to vary our VAT policy and we can then do it in a way that helps the industries we particularly want to support.

“Helping out pubs is exactly one of the areas we should look at. VAT can be varied according to the needs of the UK rather than to the needs of the EU.

“That’s one of our benefits from January 1 and I know the government will use that power sensibly to help industries affected by Covid.”

Conservative MP Kate Griffiths said grants and business loans are key to the industry’s survival at the moment but when pubs reopen a package will be needed to help drive up demand.

said: “My constituency of Burton is renowned as the capital of brewing in the UK and I’ve seen first hand how the industry has been devastated by the pandemic.

“The Eat Out to Help Out scheme was enormously successful and it will probably need a stimulus package similar to that to drive consumer footfall and help the industry recover and VAT could be part of that.”

A HM Treasury spokesman said: “We have supported pubs since the start of the pandemic, with our package of support adjusting in line with the level of restrictions in place.

“As well as initial grants worth up to £25,000 in spring, closed pubs now benefit from monthly grants worth up to £3,000, and up to £2,100 if they are open but severely impacted, as well as an extra one-off £1000 grant for this winter.

“That is on top of the furlough scheme, which we have confirmed will remain in place until the end of April, an extended VAT cut for hospitality, business rates write-offs, tax deferrals, government-backed loans and additional funding for local authorities to support business in their areas. Taken together this is one of the most generous packages of support in the world.”

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .