A cafe owner has joined the campaign to lower VAT for hospitality, describing it as a “boot on the neck” of small businesses.

Olly Cameron from Hermit Crab Coffee in Machynlleth said she has reached the cap on what she can charge for a latte, but is struggling to make enough profit and has taken a significant pay cut to keep her young business going.

The issue, she says, is the five-figure bill she gets from His Majesty’s Revenue and Customs every quarter - the 20 per cent VAT she must pay.

She said: “We’re always busy so this business should be thriving, but financially it’s not.

“There is a glass ceiling on the kind of profit you can expect to make.

“If I were a mechanic, I would add VAT on each bill and claim back VAT on everything I buy.

“In hospitality, almost none of what we buy in (food) is VAT-rated, so I claim back maybe £500 for every five-figure bill I get - there’s a massive discrepancy.

“The UK is one of the only countries to have a flat VAT rate.”

Ireland has just lowered its VAT rate for hospitality to 9 per cent following a successful campaign, whilst European countries charge an average of 12.8 per cent.

Olly joins growing calls to cut VAT for hospitality, following an increase in minimum and living wages in April, changes to business rates and rising fuel costs due to the Middle East war.

A recent survey found two-thirds of hospitality businesses are set to cut jobs due to these “suffocating” changes, with one in seven businesses reporting they will be forced to close.

Olly said: “Spaces like Hermit Crab are important for communities - we have a genuinely diverse customer base, from born and bred Welsh speaking locals to tourists to queer communities putting on events.

“People genuinely support us, and we’re at risk of losing these places, and it will just become another Starbucks.”

Large coffee chains, including Caffe Nero, Pret A Manger, and Starbucks, have historically gotten around this issue by finding legal ways of avoiding tax - Caffe Nero recently reported paying no corporation tax for a decade.

Olly suggested that, on top of lowering VAT, it could be improved by charging on profits rather than turnover.

After meeting with her MP, Steve Witherden said: “It was disconcerting to see the damaging effects of our unfair tax system in operation when I visited Hermit Crab Coffee.

“Multinational giants get away with daylight robbery while locally owned, independent businesses struggle to turn a profit.

“The whole tax system needs a rethink.”

Responding to a petition that gained 18,500 signatures calling for lower VAT, the UK government said that whilst some costs had increased in April, support was offered via lower business rate multipliers, adding: “In January the government announced that every pub and live music venue will get 15 per cent off its new business rates bill on top, ahead of their bills being frozen in real terms for a further two years.”