Drinkers get VAT New Year break

A sudden price hike at midnight could cause confusion among drinkers

New Year's Eve revellers will get an extra six hours of reduced-VAT drinking, the government has announced.

The rate, which was cut to 15% as part of the government's anti-recession package, rises back to its normal 17.5% at midnight on 31 December.

But Treasury minister Stephen Timms said pubs, restaurants and clubs could go on charging at the lower rate until 6am on New Year's Day.

He told MPs this would be "welcome news" to businesses.

Licensees would otherwise have had to change prices at midnight, risking confusion - and possible annoyance - to customers.

'Concerned'

In the Commons, Liberal Democrat MP Greg Mulholland said the reversion to the old VAT rate, combined with the "ill-judged and damaging" recent rise in beer tax, would put 5 pence on the price of a pint.

He urged Mr Timms to consider the impact on pubs.

The minister replied: "We are concerned about what happens on the night of 31 December.

"I said in May that businesses open across midnight, like pubs and clubs, would be able to continue VAT at the lower rate.

"I can confirm today that will be until 6am on the morning of January 1. That will be very welcome news, I think, to institutions like those you are concerned about."

VAT was reduced from 17.5% to 15% in December 2008 as part of moves to deal with the economic downturn.