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Prolonged VAT reduction and duty cut will aid UK recovery, says WSTA

Published:  14 January, 2021

The Wine & Spirit Trade Association (WSTA) is calling on the Chancellor to extend the VAT reduction as well as the duty cut for alcohol as it says businesses in the on-trade have been ‘unable to feel the benefit’ of the schemes.

Extending the VAT reduction for hospitality in the upcoming Budget formed one half of a letter sent to the Treasury this morning.

Currently, the temporary cut in VAT to 5% for soft drinks and food will lapse in March. To support the hospitality industry in its recovery, the WSTA is asking the Treasury to prolong the scheme until at least March 2022, while also extending the scheme to cover alcoholic drinks.

“We appreciate that the public finances are under tremendous pressure, but so are the businesses we represent,” said CEO Miles Beale. “That is why our asks are modest and targeted at promoting the recovery of our sector throughout 2021.”

He continued: “To survive then recover and eventually thrive, wine and spirits businesses need a duty cut and an extension of the hospitality VAT scheme to include alcoholic drinks; and next through the government’s Alcohol Duty Review, which must deliver a simpler, fairer and supportive alcohol taxation regime.”

The changes could be vital for the hospitality sector which, as Harpers reported yesterday, looks set to take a £30bn hit in revenue in 2021. 

Between 2020 to 2025, the Rebuilding of Hospitality report estimates that the cost to hospitality industry will be around £132.9bn in previously expected revenues.

Beale added that a low tax environment would enable UK businesses to recover from 2020’s hugely impactful year, while also meeting their international potential post-Brexit.

Despite the duty freeze in last year’s Spring Budget, where all alcohol excise duties were suspended, the UK’s alcohol industry duty remains one of the highest in Europe.

Currently, 55% of the average priced bottle of wine and 73% of a bottle of spirits, at 40% abv in retail is taken by the Treasury in tax and VAT.

The WSTA is hoping the chancellor will consider both a duty freeze and a VAT extension in the upcoming March Budget.