Tax raids and rising costs: Hospitality sector under pressure

The UK hospitality sector is currently experiencing significant financial and regulatory challenges. Industry representatives have expressed concern that recent tax policy changes, coupled with increased enforcement activity by HMRC, are placing unsustainable pressure on businesses operating within the sector. Pubs, restaurants, and hotels, many of which are still recovering from the economic impact of the pandemic, now face what some have described as punitive tax burdens and heightened compliance scrutiny.

Seasonal strain and employment costs

 The summer period, traditionally a time of increased consumer demand and seasonal hiring, was instead marked by contraction. Employers reported difficulty in maintaining seasonal roles, particularly those aimed at younger workers, due to rising employment costs. The increase in employer National Insurance Contributions (NICs) from 13.8% to 15%, alongside a reduction in the earnings threshold, has significantly impacted the affordability of part-time and temporary staff.

 This shift has contributed to a notable decline in job opportunities across the sector. Reports indicate that over 1,100 hospitality venues have closed since the last Budget, with approximately 84,000 jobs lost in the seven months following the NICs changes. These figures suggest a broader trend of financial instability and reduced workforce capacity.

Industry advocacy and proposed reforms

 In response to these pressures, trade bodies such as UKHospitality have launched advocacy initiatives aimed at securing policy reform. The #TaxedOut campaign has called for a range of measures, including:

• A reduction in VAT to align with European averages;
• Business rates relief for smaller venues;
• NIC exemptions for young and returning workers.

Kate Nicholls, Chair of UKHospitality, has warned that the sector is at risk of being “taxed out of existence,” and has urged policymakers to consider the broader economic and social value of hospitality businesses.

Conclusion

The hospitality sector is at a critical juncture. While tax compliance and enforcement are essential components of a functioning fiscal system, there is a clear need for a balanced approach that recognises the unique challenges faced by hospitality businesses. As the government considers future policy directions, it must weigh the importance of regulatory integrity against the imperative to support a sector that contributes significantly to employment, community engagement, and the national economy. We await the forthcoming budget with bated breath…