The government is deliberately withholding tens, possibly hundreds, of millions of pounds from the hospitality sector.

 

Through HM Revenue & Customs (HMRC), the government is frustrating attempts by a number of businesses in our sector, including Lucky Voice, to claim the VAT relief granted at the height of the pandemic – a time when (as if we need reminding) thousands of venues were forced to close, and then were reopened under strict (and costly) conditions. 

 

VAT was temporarily reduced to 5% to help businesses most affected by this situation and the operational challenges that followed – including the need to invest in new systems and layouts to comply with social distancing rules. It applied to food, non-alcoholic drinks, hotel rooms and admissions to a wide range of cultural and leisure activities, under the hospitality umbrella. 

 

In our case, it seems that not all hospitality is equal. The argument for us, and many other comparable businesses, boils down to whether what we do (in our case, charging for admission to our karaoke rooms) qualifies as a similar cultural activity to those other businesses in the leisure and tourism industry that qualify for this relief (or not), as called out in the legislation – more on this below. The question is worth more than £250,000 to our business. 

 

It was in 2021 that we first approached HMRC to confirm that we were eligible for the reduced rate of VAT, only to be incorrectly told that the reduction did not apply to us as a leisure business.

 

This isn’t just about Lucky Voice in isolation. Many other operators – from independent leisure venues to multi-site hospitality groups – reasonably assumed that similar hospitality-driven activities would be eligible, as per the legislation. 

 

The nub of the issue is this: the emergency legislation was put together in a record hurry. It was lifted from similar EU-drafted laws. The wording isn’t perfect, which is forgivable given the need for speed at that time. It references food and drink sales (excluding alcohol) and hotel bedrooms, as well as admissions to museums, theatres, circuses, fairs, amusement parks, concerts, zoos, cinemas, exhibitions and “similar cultural events and facilities”, including planetariums, botanical gardens, factory tours and studio tours. 

 

Karaoke fits comfortably within this list. It’s a communal, cultural experience. It’s ticketed. It’s hosted in venues that were directly impacted by lockdowns and social distancing. Yet HMRC has decided it doesn’t make the cut, although interestingly, in 2022, HMRC did accept that a business with karaoke facilities was entitled to the reduced rate of VAT to admissions to its karaoke rooms before changing its mind in 2024 – at the same time as we submitted our claim.

 

Meanwhile, bowling alleys, many of which also offer karaoke facilities, with some even using Lucky Voice software, do qualify. The idea that bowling does qualify and karaoke doesn’t, frankly, feels absurd. 

 

What is somewhat galling, especially in the wake of the last Budget – and as we face into another in a matter of weeks – is that HMRC appears to be hell-bent on pursuing legal action at taxpayers’ expense. 

 

HMRC is essentially rejecting all claims and preparing to take a small business called Ingliston Driving Experiences (IDE) back to court, over £13,000 in claimed VAT relief. An earlier hearing found in favour of IDE, and now HMRC is appealing that decision. The result will not set a legal precedent, but will simply establish whether or not driving experiences qualify for the reduced VAT rate.

 

Let’s not forget: this legislation was designed to help the hospitality, leisure and tourism industry – the sector that was completely shut down during the pandemic and bore the brunt of social distancing rules for years after reopening. The relief was a legal lifeline, not a loophole. It was meant to save jobs and support recovery, investment and resilience.

 

We believe that HMRC is ignoring the intention behind the law, which from the moment Rishi Sunak stood up and announced it was to support the businesses most affected by the shutdown. It was a break designed to help operators cope with reduced capacity, increased costs and the long road to recovery. 

 

HMRC is happy to argue the intention of a law when it suits itself. In the JD Wetherspoon cider case from earlier this year, HMRC successfully argued that although cider wasn’t explicitly included in the wording of the law, the intention was that all alcohol sales, including cider, should be excluded from benefitting from the reduced rate – and the tribunal agreed.

 

This isn’t just a technical dispute. It’s a question of fairness, consistency and whether the government is serious about backing hospitality.

 

The impact of this inconsistency is real. For Lucky Voice, it’s a six-figure sum that could be reinvested into our teams and our venues. For others, it’s much more. These are funds that we are rightfully expecting to receive– and are now withheld without clear justification. It’s not just frustrating. It’s damaging.

 

Across the sector, there’s growing fatigue. Businesses are tired of being told they don’t qualify without explanation. Tired of being left out of schemes that were introduced to support them. Tired of HMRC’s delaying tactics and lack of transparency.

 

With the Budget now just around the corner, it’s time for a rethink. Hospitality businesses deserve clarity, consistency and the support they were promised. HMRC must stop hiding behind narrow interpretations and start engaging with the sector it was tasked with supporting.

 

This relief was introduced to help us recover. It’s time the government’s commitment was honoured. It cannot be right for HMRC to continue throwing taxpayers’ money at trying to deny the hospitality industry the benefits to which it is entitled.

Hospitality, we often hear, is a people industry. And if you work in, say, petroleum, or aerospace, or possibly the law, it must be very tempting to look over at us, cross yourself and thank all of your stars. At least you’re not dealing with humanity.

Humanity doesn’t really know what it wants. That other people industry, advertising, could tell you more about this. You’d think it was enough just to chuck a photo of a KitKat up on a billboard and go home, but no. What sold a KitKat in the 1980s – breaking it in half, slowly – just isn’t the case anymore. 

What the sector is slowly working out is that what the guest wants – not being treated like an inconvenience, having a positive experience – is the same as what employees want and, given that team members are as hard to come by as guests, it’s something to consider.

Just being a people industry isn’t enough to make it so. At Propel’s Culture Talent & Training Conference, Rachel Woodcock, people director at Hickory’s, said: “When I joined Hickory’s, it said it was a people business, but it wasn’t. It was using words like ‘let’s give him a roasting’, ‘let’s 86 him’, ‘let’s rip him a new one’. We’re not perfect, there’s still a car park chat happening every now and then, but we’re working on it.”

Katy Moses, managing director of sector insight consultancy KAM, told delegates about the importance of employee experience – which was potentially higher than the customer experience, because it meant higher productivity, lower turnover and lower absenteeism: “It’s two parts of the same pie,” she said.

KAM’s latest research found 66% of employees thought that customer service and operational efficient were more valued than employee well-being, so clearly the pie has some issues with its filling. Fear not, said Moses: “The main improvements employees are looking for – better explanation of company policies, for example – are not something you need to talk to your financial director about, most of them are cost neutral.”

At Wagamama, head of people experience Becky Galligan said what everyone has been thinking for a while: the lack of punctuation and all lower case at the company was holding some people back. Aside from that, she added: “We are working hard to align our guest experiences to our team experiences. Every guest experience starts with the person in front of them. We only hire 3% of people who apply: we move away from people who want a job to people who want to work here.”

But how to achieve this? Values are of growing importance, and we all have them. The motto of the Institute of Chartered Accountants in England and Wales – the location for the event – is “recte numerare”, which means not “numerous bottoms”, but “number correctly”.

Avoidance of a cultish atmosphere of toxic positivity, where everyone has to think the same way and you miss diversity of thought, is a critical factor to balance in a business when gathering around values. Galligan clarified: “How people present values and work is different from having the same belief set – I believe in innovation from a different viewpoint to how other people might see it.”

Similarly reassuring news for the sector was that 61% of those asked agreed that hospitality provides great career opportunities. But that was not good enough, said Moses: “I think that number should be in the 80s.”

This required an alignment across the business in terms of training, added Gina Knight, head of people at Flat Iron, who said: “In-role development is usually done by the operations team, and there is an opportunity to get closer. We need to think about how the people in our business learn, and if you don’t look at how many people are, for example, working more than 200 hours, you are stacking up future issues. 

“A lot of operations training is to do with compliance. We need to reduce some of that training, but make it more engaging and free us up to develop soft skills, which are really hard to learn, because behavioural change is difficult. We need to think about where we’re adding experience in training.”

With legislation looming, Knight added: “We’re thinking about some of the headwinds coming our way, so that when statutory sick pay changes comes in, we’re prepared. We need to think about what we’re doing for the people in role who need help along the way.

“If you face into the changes which are coming, you will have better people practices and treat your people more fairly. It’s far enough away to think about how to build that. Now’s the time to think about how you’re developing your team and how it will develop your culture.”

Which takes us back to those values. JB Hall, head of people and culture at Brother Marcus, concluded: “People, they don’t want rubbish, they get it all day long. In my job interview, I said: ‘I won’t lie for you; I won’t sit in front of people and tell them we have values’.

“It’s your own personal values. If that’s falling on deaf ears, then do the right thing. If you’re here to make money and that’s it, fine. If you love hospitality and you want to be somewhere people care, move on.”

“In my head, culture is a strategy, it’s a fine construct. It’s a roundabout: you give way to the right, or you’re going to crash.” 

Four legs good, two legs bad? Very much true for the certain parts of the supply chain into Gaucho. For everyone else, all animals are equal.

Across the UK’s 650 parliamentary constituencies, there are, on average 70 pubs and two or three breweries – a powerful presence in every corner of the country. In mine, The Gower in South Wales, we have four breweries and 62 pubs, providing 1,300 local jobs, generating local investment, supporting the local supply chain and drawing in visitors from all over the UK and beyond.

 

Collectively, pubs and breweries add £34.3bn annually to the economy, supporting more than one million jobs, paying £18bn to the Exchequer and providing an astonishing £8.28 in social benefit for every £1 invested. 

 

A sector delivering billions in value needs to be added to the UK’s Industrial Strategy. If it does truly aim to “unlock our country’s potential by transforming the business environment and supporting future industries”,then it’s time to start valuing our foundational economy. Hospitality is part of this bedrock.

 

In its 30-year history, the All-Party Parliamentary Beer Group (APPBG) has a long tradition of highlighting vital issues concerning the brewing and pub sector, including business rates, licensing reform and excise – and to our mind, this omission is one of the most vital facing the sector today. We therefore launched an inquiry to discover what this omission may mean for the sector. Our report, How Brewing and Pubs can Help Drive Economic Growth, is the culmination of this.

 

Speaking to everyone – to those behind one of the UK’s oldest pubs (the 650-year-old Shoulder of Mutton) to one of our oldest brewers (the 327-year-old Shepherd Neame) – we gathered evidence from 26 diverse organisations as we set out to understand: how beer and pubs have supported economic recovery in the past, the scale of industry investment in people and skills, and the community and well-being value of the sector.

 

I’d be preaching to the converted if I used this column to cite all the sector’s economic strengths and capabilities – you live and breathe them daily. So, rather than wasting column inches, I’ll point you to our full report and focus on what needs to change. 

 

Our report provides evidence that suggests the sector has been overlooked and overburdened with tax, and that recent regulatory initiatives are choking investment, profitability and the potential of the sector. The result of all this is missed opportunities for growth and investment to the detriment of the whole UK economy.

 

That a pro-business environment for beer and pubs could unlock investment and economic growth is not under dispute – hospitality delivered above average growth in the ten years before and the four years after the pandemic – so rather than side-lining the sector, the government should be creating an environment that fosters its success.

 

Our report outlines ten recommendations that would help create just these circumstances, including new terms of reference for the Hospitality Sector Council strategy, meaningful business rates reform, the removal or reduction of employers’ national insurance contributions, reform of apprenticeships, a reduction in beer duty and a reduced rate of VAT on sales of food and drink.

 

These recommendations aren’t just sensible, they’re urgent – providing a platform for creating a fertile fiscal and regulatory environment that will enable the brewing and pub sector to deliver economic growth very quickly. 

 

Since the launch of the report, we have been working hard to ensure our recommendations have reached a wide audience. We’ve been talking in the media, held an MP reception to explain our findings to our colleagues and encouraged them to speak up on behalf of the pubs and breweries in their constituencies. We have submitted our findings to the Treasury ahead of the Budget due to take place at the end of next month (Wednesday, 26 November).

 

As an APPG, we won’t sit quietly while this vital sector is side-lined. We’ll keep banging the drum in parliament, urging our fellow MPs to recognise the brewing and pub industry’s enormous potential – the heritage it preserves, the skills it builds, the investment it sparks, the well-being it fosters and the communities it anchors. These businesses are woven into the fabric of our constituencies, yet many are hanging by a thread. It’s time to stop overlooking them – and you can help us make that noise.

 

Engage with your local MP. Invite them to come to your pub or brewery to show them what’s at stake. Let them see the jobs you have created, the local businesses you support and the challenges you face. Show them our report to help them understand how they can help you and your business. Demonstrate first hand how the sector can, and will, respond quickly if it is given the means to do so, contributing to sustainable growth across the economy through key foundational skills, local investment, innovation, enterprise and personal well-being – not to mention local and national pride.

I have recently, and somewhat belatedly, finished watching Clarkson’s Farm Four, where Jeremy buys his pub. It was an interesting experience for me. Where I have previously found all of his farming shenanigans funny, I was a bit more frustrated at the poor decision-making opening a pub. Perhaps I now understand how the farmers feel. I hope the advice was for TV appeal rather than thinking it might work!

 

One item really struck me though, which was a little piece Jeremy did on what happens to a village if it loses its pub, and what is left of the village when that happens. His argument was that the village is little more than a dormitory, with no heart and soul, once the pub disappears. It didn’t escape me that while he was making that argument, he was also opening what looked very much like a roadside pub, one that would inevitably draw trade away from the local villages. 

 

Sure, the village might still retain some sense of community. It could have a shop (though I’m not entirely convinced that counts, if I’m honest). But a club, a community centre – somewhere people can actually come together – that really does matter. In our two villages where we operate, one village has a cricket club and a shop. The pub competes with the cricket club as a community hub, and it is great that the two co-exist together.

 

In the other village, we are the only things left. No shop and no community centre. And the neighbouring two villages have nothing at all. We are their community, and as a result, the three villages now see themselves as a group of villages rather than separate ones.

 

The village Christmas and summer parties all happen in the pub, and typically, we have a good 100-plus attending the events, which have slowly grown over the years. If we believe in community, then we need village pubs to survive. It would be relatively easy to give them support. Exemption from business rates if you are the only pub in the village would make easy sense. A grant if you are the only pub in the village would go further.

 

But just as important is planning and usage. As we move gently away from alcohol more and more, we are embracing the coffee occasion. Pubs need to become coffee shops so that those who want to meet have a place and a space that works for them.

 

One of my most depressing drives is across the A66, which joins the A1 to the M6 (you southerners probably won’t have heard of it). I am consistently upset by how busy the farm and coffee shops are, and how quiet the pubs are. The pubs along the strip need to figure out how to make themselves attractive to this market and deliver an offer that works.

 

How we do this is not easy. When we took on one of our pubs, we built a large extension at the back, which not only added loads of covers but joined up a disused barn. We made the mistake of not branding it as a separate coffee venue. 

 

As it happens, since covid, we have repurposed it as a wedding venue and are now building a decent wedding business. We’ve renamed it the Orangery and are now trying to work through how to brand it effectively as both a wedding venue and a coffee shop. Lots of fun.

 

I once went into a pub in the south that had a small coffee shop next door, run and owned together. I was fascinated watching customers come into the coffee shop who would never have gone into a pub, look around for the best seat and then wander through to the pub because they preferred the seating. A great lesson in kerb appeal for me.

 

But of course, if you have a coffee shop and a bar, then the danger is that you need two staff to open, and if you are not careful, you have immediately lost any profitability you added. So, how to work the model and leave one half or your business unmanned is a real skill, but an important one to learn.

 

So, while Jeremy Clarkson might only be seen in the pub drinking a pint, I think the market for coffee is an important one, which we need to find a solution for in a fair proportion of our non-city centre industry. As well, of course, as the government doing what it can for the community as well.