Pubs Need Tax Equality, Not Tax Complexity

Released 9th September 2025

J D WETHERSPOON PC

Pubs Need Tax Equality, Not Tax Complexity

by Tim Martin, 9th September 2025

The entire hospitality industry is united in its view that pubs, clubs and restaurants pay wildly excessive taxes, especially VAT and business rates, in comparison with supermarkets.

This tax disparity is harming businesses and high streets, but also the social fabric of the nation - where, other than pubs, can you temporarily escape the attentions of your own family?

Supermarkets pay zero VAT in respect of food sales, whereas pubs and restaurants pay 20%, enabling supermarkets, in effect, to subsidise the selling price of beer, wine and spirits.

A consequent anomaly is that food for posh dinner parties in Notting Hill or the Cotswolds is VAT-free, whereas fish and chips at your local pub attracts the full 20%. Just ask Jeremy Clarkson.

As a result of these perverse tax incentives, as investment bank Morgan Stanley recently reported, pubs have lost approximately 50% of their beer trade to supermarkets since the millennium, having lost a substantial amount even before then.

Unfortunately, VAT is not the only hospitality disadvantage. Pubs also pay about 20 times more business rates per pint than supermarkets. Something underhand is afoot.

Here's how this faulty system works.

The explanation is just about complicated enough, so that few people in the government, and maybe even in the Treasury, really understand the details - and therefore the enormous hospitality disadvantage.

The Rateable Value of any business is set by the Valuation Office Agency (VOA), and is equal to the yearly rent the property could have been let for on the open market.

For a pub, this is something called the 'market rent', which is typically around 10-12% of a pub's annual turnover.

The Rateable Value is then multiplied by the "National Non-Domestic Rate Multiplier"- the NDRM. For 2025/26 the multiplier is 0.555.

Therefore, a typical pub pays business rates calculated as 0.555 x 10% = 5.6% of its annual turnover.

So a pub with sales of £600,000 per annum (less than half the Wetherspoon average) will pay business rates of £33,600 - 5.6% of £600,000 equals £33,600.

Put another way, for every £1 of sales, a pub will pay business rates of 5.6p. That's 28p on every £5 pint of beer - approximately the average price of a pint these days.

Let's now compare this with the business rates supermarkets pay.

Back in December 2020, Reuters reported that Asda would "pay business rates of £340m… to the UK government… waiving tax relief."

Asda's sales were about £23bn in that year, so the business rates payable were just under 1.5% of sales, meaning a £5 pint cost them only 8p.

Unfortunately, the tax disparity per pint between pubs and supermarkets is much worse than that.

With their much lower overheads, the average pint of beer bought from a supermarket will be far, far less than £5 - maybe as little as £1 a pint, meaning a business rate 'levy' of only 1.5p.

So, 1.5p in a supermarket versus 28p in a pub… which is nearly 20 TIMES more.

Trade organisation UK Hospitality, acting on behalf of the industry, has made a strong case for reducing hospitality taxes, in its heroic campaign to reduce the business rate multiplier.

Unfortunately, this sensible and easy-to-understand approach risks being undermined by a recent, well-meaning suggestion from Greene King, which argues that business rates should be based on profits, rather than sales.

However, this would surely create a nightmare of complexity.

Agreeing with government valuation officers a Rateable Value based on the market rent on average, or "hypothetical", sales is complex enough - but substituting profits for sales involves far more complex calculations, and it's hard to see how this could benefit publicans, or indeed the government.

Government valuation officers, and those who negotiate with them on behalf of pubs, have built up a substantial body of knowledge, based on local pub sales comparisons.

Reverting to a profits-based analysis would require a huge educational programme, in effect creating a massive increase in demand for tax advisors, which is surely every citizen's nightmare.

As things stand today, the valuation officers' primary task, in concert with their pub counterparts, is to estimate the annual sales of a pub on which the market rent is based - that is to say, one number only.

However, a system based on profits is infinitely more complex - the Wetherspoon profit and loss account, for example, has 170 different lines, mostly representing costs, which differ from pub to pub.

In reality, it would be all-but-impossible to agree these costs for every pub in the land.

We are sure that Greene King's heart is in the right place, especially since they brew the sainted Abbot Ale, but feel they've wandered off course, perhaps after a heavy session, by recommending a profits-based analysis.

Finally, when Jacques Borel campaigned, a few years ago, in the UK for a fairer VAT rate for pubs, clubs and restaurants, which he had successfully obtained in many other European countries, the industry was disunited.

Ted Tuppen of Enterprise Inns and Rooney Anand of Greene King, for example, refused to support Jacques' campaign.

A disunited industry ended up paying far higher VAT than almost any other European country - as the table from The Scottish Hospitality Group, below, illustrates.

The lesson is: Keep It Simple, Stupid. It's a basic principle that taxes should be fair and equitable. All we're asking for is equality with supermarkets, which are doing an excellent job for their customers - the same rate of VAT and the same business rates per pint.

That way, of course, the government will collect more taxes in the end, as there will be a more successful hospitality industry, more employment, more vibrant town centres and less vacant shops and pubs.

Tax equality equates to sensible economic policies - and we are sure that the entire nation will drink to that.