UPDATE 2-Wetherspoons says sales still well down as it appeals for further VAT aid

* Company expects to make FY loss

* Appeals for extension of lower VAT

* Says government’s meal scheme helping sales

* Shares up 1.6% (Adds shares, details on VAT)

Aug 24 (Reuters) - British pub operator J D Wetherspoon said on Monday its sales were still down sharply year-on-year despite help from the government’s subsidised meal scheme, and called for tax relief for the hospitality sector to be extended.

The company forecast a loss for the year and said it was looking to seek waivers on its loans as it dealt with the financial fallout of months of coronavirus-driven pub closures and subsequent social distancing measures.

Sales have been helped by the government’s “Eat out to help out” discount scheme, offering half-priced meals from Monday to Wednesday, it said, and by the addition of extra seating outside.

However they were likely to fall further as the scheme winds down, Wetherspoon said, adding that the government should maintain lower value-added tax (VAT) on meals.

Britain temporarily cut VAT on spending on hotels, restaurants and tourist attractions last month to 5% from 20% to boost demand for services hardest hit by the COVID-19 lockdown.

“If this major step towards tax equality is maintained in the long term, it will result in a significant increase in investment and employment in the on-trade,” the company said.

Shares were up 1.6% at 988.5 pence by 0755 GMT.

“What really matters now is how the business fares without the sales incentive and if it can avoid pushing up prices to help claw back some of the lost revenue from earlier this year,” AJ Bell investment director Russ Mould said.

“It cannot afford to upset customers who are already in a fragile state of mind.”

Wetherspoons said supermarkets had sucked up much of the pub industry’s food and beer trade in the crisis.

The company, whose cheaply priced pubs are a fixture in British towns and cities, said earlier this month it will slash up to 130 jobs at its head office and scale back its expansion plans.

Wetherspoon said 844 of its 873 pubs were now open and that like-for-like bar and food sales were down 16.9% in the 44 days to Aug. 16. (Reporting by Tanishaa Nadkar in Bengaluru; Editing by Rashmi Aich and Jan Harvey)