Is VAT To Blame for So Many Pub Closures?

7 November 2013, 12:20

JD Wetherspoon is one of the most familiar pub groups in the country. It has had a relatively good three months’ worth of trading according to its latest figures, but that hasn’t stopped it from pointing out the potential harm VAT on sales can cause.

Whether you use pubs regularly or not, you can’t fail to have noticed the industry is under increased pressure. Thousands of pubs have had to close their doors in recent years. The recession saw many people struggling to make ends meet. Luxuries were cut right back and for many this meant cutting down on the amount of time they spent at their local. For some, it meant buying cheaper alcohol at their local supermarket and enjoying a drink at home instead.

This is the area JD Wetherspoon has concerns about. According to their latest management statement, supermarkets pay very little in VAT on the food they sell. In contrast pubs must pay 20% – a vast difference to be sure. The pub group points out that the supermarkets can therefore afford to cut the costs of the alcohol they sell, to make it more appealing to the customer while still making healthy profits.

JD Wetherspoon may be doing well according to its latest figures, but they have a point when it comes to the VAT situation. If VAT levels were the same for pub sales as they are in supermarkets, would we see a resurgence of the pubs that have been disappearing all round the country? Certainly, paying a significantly lower rate of VAT on food in pubs would make the meals cheaper and therefore more attractive to those thinking of eating out. It could transform the industry and lead to better sales in both the short and the long term.

The government doesn’t look set to do anything about this in the near future. The title of this article may be a little narrow minded – there are many factors at play here, after all. However it is definitely worth pointing out that supermarkets do appear to be unfairly advantaged by the VAT situation. If it was a level playing field things could be very different indeed. Pubs provide jobs and a sense of community in some areas. They are more than just local businesses. JD Wetherspoon may be doing relatively well, but lots of independent pubs are struggling to survive, even though they may have done so thus far.

Eating and drinking out will always be pricier than it is to eat and drink at home. However, as you can see there is more to this than meets the eye. Will VAT always be charged at the same rate in pubs – or could there eventually be a welcome change?