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Restaurants refuse to pass on VAT cut
Sri Carmichael and Jonathan Prynn2 Dec 2008
Leading London restaurants are failing to pass on the full cut in VAT to customers.
The Government has slashed the tax, which also applies to served food, from 17.5 per cent to 15 per cent in the hope that reduced prices will encourage people to spend more. But many restaurateurs are hampering the bid to revive the economy by refusing to cut the cost of their dishes.
Mike Gottlieb, who owns Christopher's restaurant in Covent Garden and The Enterprise in South Kensington, said: "Most people I'm talking to are doing what I'm doing and leaving prices as they are." Mr Gottlieb, who is also president of the Restaurant Association, added: "It's a huge amount of work in a short period of time to change all the prices. And at the busiest time of year. We just can't afford to have teams of people sorting it out."
D&D London, which owns at least 20 high-end restaurants across the capital including Quaglino's, Floridita and Coq d'Argent, said it is absorbing the tax cut into its profit margins.
A spokesman said: "We have decided not to reduce our prices to reflect the reduction because since 2007 we have had a policy of maintaining or reducing prices in our restaurants, despite increases in food and energy costs." The group said it will regularly review prices to ensure it "remains competitive".
Gastropub Great Queen Street in Covent Garden said it is not adjusting menu prices because its food is "already very good value".
But most other restaurant chains said their customers will see the full benefit of the tax cut, which came into force yesterday, with those that have not had time to reprint menus instead adjusting the final bill at the till.
But YO! Sushi, which has more than 20 branches in London, said it would not change prices as it thinks clients will be confused.
A spokesman said: "Plates are colour-coded with six simple price points. Our customers are used to and recognise the transparency of our pricing. Introducing the cut would involve changing the prices to awkward numbers."
But the Japanese fast-food outlet insisted it would be passing on savings in the form of more discount promotions next year.
A free glass of wine or beer is currently being offered to customers at its Selfridges branch who spend more than £15. Indian restaurant and take-away chains Bombay Bicycle Club and Tiffinbites are offering a free side dish, such as poppadoms or samosas, with each order instead of changing food prices while it waits to reprint its menus.
VAT applies to hot take-away food but not cold.
Reader views (10)
I don't blame the catering industry, or indeed other small to businesses from keeping the VAT "reduction".
This Labour is totally out of touch. Don't they realise the cost of changing menus, till software, displays etc. To the small business trying to survive an extra £1,000-£2,000 at a time when we are in an economic crisis could tip them over the edge.
And yes, I agree with P I Staker, stop moaning, small businesses are already suffering and we should be supporting them!
- Ertan Hurer, London, England, 02/12/2008 18:00
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Quite right that restaurants (and most other businesses) are not reducing VAT. This 2.5% reduction in VAT helps businesses enormously (a business making 5% profits has just seen its profits increase by 50% overnight!).
This is the goverment intention!! Help businesses and they will be less likely to cut jobs. If we can save jobs then we have a chance of getting through this recession in OK shape. Otherwise we are all doomed!! Well done Darling!!
- Edward, London, 02/12/2008 17:19
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Stop moaning and dont go then
- P I Staker, London, 02/12/2008 16:03
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I like the phrase: "absorbing the tax cut into [their] profit margins"...
Next time I eat out I will be absorbing their service charge and tip into my pocket.
- C Harrison, London, 02/12/2008 13:49
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They call it obtaining a pecuniary advantage by deception. Maximum 10 years in clink and no F words if you want early release for good behaviour.
- Jack Thompson, London, 02/12/2008 13:37
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The VAT reduction of 2 1/2 % was funded by an increase in excise on beers, wines and spirits of 8% so please don't expect the restaurant and pub trade to cut prices on food as they are being kicked in the balls by the government.
- Simon Hollowood, London, 02/12/2008 13:02
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I suspect the average clientèle of these establishments aren't affected by the credit crunch/recession, so perhaps the owners of said establishments feel that they don't need to pass on the VAT reduction..?
- V.Devers, West London, 02/12/2008 11:38
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A classic case of cutting nose off to spite face - if a restaurant still charges 17.5% that is what they have to pay the government so why not reduce the bill to encourage more customers? Laziness symptomatic of so called quality restaurants in London - simple answer as a customer is to remove the service charge from the bill.
- Jim, London, 02/12/2008 11:34
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It is a no nothing discount anyway, a bit like the bloke that thought it up.
If they want to do somthing to kickstart the economy, remove all stamp duty as a first step and then go on from there with other measures as and when required.
- Mr Peter Pryer, Worthing,West Sussex,England, 02/12/2008 10:29
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Well we all know where NOT to go for diner then.
- Adrian, London, 02/12/2008 10:14
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