Big VAT bills are the wrong 
ingredients for cafe’s future

Managing partner Sophie Eades runs the Mashed Swedes Cafe with her brother Tom and said the tax is a disincentive for small businesses to expand.

They took over the cafe in Russell Street from her mum Susan 18 months ago, but once businesses reach a VAT threshold of £79,000 they are faced with a tax bill of 20 per cent on their takings.

Sophie, aged 23, said small businesses should be allowed to pay a graduated level of VAT, starting at five per cent, in the first five years to enable enterprise to flourish in the early stages.

She said last year’s VAT bill was £4,000 and is expecting a similar demand next month, and because most of what they buy is free of VAT, they can’t claim any back

Sophie, who lives in Old Town , said the cafe gives work to five part-time staff and two full-timers.

She said: “I don’t mind paying VAT, it’s just this massive slice of everything that goes in the till goes out of the business.

“It’s not an incentive for small businesses to expand to create more jobs.

“I believe there is less VAT charged in cafe businesses in France, 10 per cent, rather than 20 per cent. Why could this not apply to cafes here?

“If we are not able to carry on it’s not just our staff who suffer but also the hundreds of regulars who come in everyday.

“A lot of them are pensioners who rely on us because it’s reasonable prices and home-made lunch or dinner.”

Pressure on the business has meant her first late payment on the rent and the latest bill is for PAYE and National Insurance for her staff.

She said: “As soon as you pay one off another bill comes along. After we’ve paid the bills there’s not much to save.”

An ex-pupil of North Leamington School, she said the partners had discussed ways to bring turnover below the £79,000 threshold, including cutting hours.

Sophie said: “But we don’t want to let the customers down.

“I don’t want to put prices up because it changes the whole mode of the business.

“We are not here to rip anyone off – we want fair prices with a fair profit.

“We like to think of it as a community cafe where people can come and have a decent meal for a fair price.

“It might sound a bit cheesy but everyone does know each other and there’s lots of conversation.”

Another way to cut the VAT bill would be to scale back on their hot-food sales and do more sales of cold food, which Sophie said is exempt from VAT.

“I like selling breakfasts and lunches and I don’t want to change it to a salad bar and cold food such as sandwiches.

“There’s enough of these places in Leamington as it is.”

Sophie has written to Warwick and Leamington Tory MP Chris White about her predicament, as well as government departments and HMRC, and is awaiting their comments.