Do I need to pay VAT on the food and drink I supply?

What are premises?:
Premises are

  • Any areas occupied by the retailer.

And/or

  • Any area set aside for the consumption of food by the food retailers’ customers, whether or
    not the area may also be used by the customers of other food retailers.

Do you

Supply food or drink for consumption on the
premises where it is supplied?
STANDARD RATED
Make sales of cold food to be taken away from
your premises, but also have on-site facilities
where food can be consumed?
You can apportion your sales of cold food
between those consumed on the premises
(standard-rated) and those taken-away (zero-rated).
If you are unable to ascertain the correct
liability at the point of sale you must retain
satisfactory evidence to support a fair and
reasonable apportionment.

Take away food and drink

Sell cold takeaway food or drink? Items follow the VAT liabilities as described in
Notice 701/14 Food
Sell Takeaway hot drinks STANDARD RATED
Is your food or drink above ambient air temperature? Then it is hot for the purpose of VAT rating
The food (or any part of it) is hot at the time it
is supplied to the customer AND ANY ONE OF
THE FOLLOWING:
It has been heated for the purposes of
enabling it to be consumed hot
STANDARD RATED
It has been heated to order STANDARD RATED
It has been kept hot after being heated STANDARD RATED
It is provided to a customer in
packaging that retains heat (whether or
not the packaging was primarily
designed for that purpose) or in any
other packaging that is specifically
designed for hot food
STANDARD RATED
Do you supply a Microwave for customers to
use themselves to heat or reheat takeway food
either before or after the till point?
STANDARD RATED
Do you sell hot and cold items at the same time
(ie. A takeaway burger and a milkshake) at an
inclusive price?
You will have to work out the tax value of each
item in order to calculate how much VAT is due
on the standard rated item.
It is advertised or marketed in a way
that indicates that it is supplied hot
STANDARD RATED
Condiments (ie. Salt, ketchup) which are
supplied at no charge to the customer?
These can be ignored for VAT purposes
Do you supply hot food with a cold ingredient
as a single item (ie. Hot dog in cold bun, Bacon
sandwiches)?
STANDARD RATED

Ordinary Catering?
Are you a catering business? If the tables below show that you are catering, then your goods will attract the standard rate of VAT.

Does your customer have to:

Defrost food? Not catering
Rehart food? Not catering
Cook food? Not catering
Arrange cold food on a platter for serving
themselves at an event?
Not catering

Do you:

Deliver COLD food or drinks? Not catering
Provide packed lunches for an event or function? CATERING- STANDARD RATE
Supply bed and board including packed lunches as part of an inclusive price CATERING STANDARD RATE
Supply bed and board allowing the purchase of packed lunches at an additional price to be consumed OFF PREMSISES Not catering
Charge a compulsory service charge Service charge is STANDARD RATE
Allow customer to leave a tip if they wish TIP is Zero Rated
Supply food to be consumed on a Ship, Train or Plane during a journey within the United Kingdom CATERING- STANDARD RATE
Supply food to be consumed on a Ship, Train or Plane during a journey to a destination outside of the UK- to another EU member state or outside the EU Zero rate
Have a vending machine in your restaurant, café, canteen or dining hall? All supplies of food and drink from vending machines in canteens and restaurant type areas are standard-rated as supplies to be consumed on the premises where they have been supplied. An apportionment will only be allowed if the food seller can produce evidence to show that a proportion of the items of cold food (that would be eligible for zero-rating) are taken-away from the canteen/restaurant premises
Have a vending machine in a corridor, hallway, thoroughfares or area not designated for the consumption of food The supplies of food and drink follow their normal liabilities according to Notice 701/14 Food.
Supply food or drink to an educational institution which is run as a non-business, as in the case of a local authority school, free school or academy school at or below cost? Zero rated
Supply food or drink to an educational institution which is run as a non-business, as in the case of a local authority school, free school or academy school for a profit? CATERING STANDARD RATE
Run a student union, supplying catering (including hot take-away food) to students both on behalf, and with the agreement, of the parent institution Zero rated
Supply food or drink to a hospital, clinic, care home or other statutorily registered institution? Zero rated
  • If you are supplying food to Cruise ships or passenger transports then please refer to Notice 744A Passenger transport and Notice 709/5 Tour operators’ margin scheme.
  • You must account for VAT for supplies of catering to staff and visitors.
  • You must account for VAT for supplies of catering or take-away to staff. No food and drink sold from campus shops, bars, tuck shops, other similar outlets and certain vending machines. Further the concession does not cover any other goods or services supplied by the student unions.
  • You must account for VAT for supplies of catering to staff and visitors.

If you’re not catering, supplying food and drink to be consumed on the premises and your goods do not meet the hot take away food tests then you only need to follow the information in Notice 701/14 Food which explains which foodstuffs and beverages always attract the standard rate of VAT.

Accounting for VAT

  • If you run your own catering outlet you are acting as principal, you must account for VAT on any supplies of catering or hot take-away food. You can reclaim any VAT charged to you as input tax, subject to the normal rules.
  • If you are a catering contractor running catering facilities on someone else’s premises as a principal, you must account for VAT on:
    a) any supplies of catering or hot take-away food. You can reclaim any VAT charged to you under the normal rules.
    b) sales of other standard rated items of food
    c) your fee to the owner of the catering facility
    d) any subsidy you receive from the owner of the catering facilities. This subsidy is standard-rated and should include payments you receive to balance a profit and loss account
    e) You must account for VAT on your supplies even if the owner of the facilities makes exempt supplies
  • If you are a catering contractor acting as an agent (ie. Although you run the canteen etc, the food and drink is supplied by the owner of the catering facilities – your principal).
  • The owner must therefore account for VAT on the supplies of catering or hot take-away food (unless they make exempt supplies)- You must treat invoives as follows: a) Invoices made out to your principal: if you buy goods or services for your principal and they are invoiced to him, the supplier should send the invoices direct to your principal, who can reclaim the VAT subject to the normal rules. You should show a VAT inclusive amount against the purchase of the item in your profit and loss account.
    b) Invoices made out to you: if you buy goods or services for your principal and they are invoiced to you, you should re-invoice them to your principal and account for VAT on them. If you buy goods or services from unregistered suppliers, you must be aware that you will have to charge VAT where appropriate. You can reclaim the VAT on the invoice subject to the normal rules
    c) Provided you issue a separate tax invoice for these goods or services when you charge them on to your principal, you should merely record the VAT inclusive amount in your profit and loss account. However, if it is your normal practice to issue a single document to serve as both the tax invoice and the profit and loss account, you must clearly show the dual purpose of the document and keep the tax invoice details separate from the other information.
    d) Your fee for your services to your principal: you must account for VAT on the fee you charge for running the catering facilities. The canteen owner can reclaim the VAT you charge subject to the normal rules.
    e) Profit and loss account: if you provide the canteen owner with a profit and loss account, you must show the VAT inclusive amounts spent on food and received from supplies of meals. If there is a profit that you pay to the canteen owner or you are reimbursed by him for any loss, these amounts are outside the scope of VAT.
  • If you supply food and drink to the owner of the catering facilities and then you prepare and serve it to the users of the canteen etc, on the owner’s behalf, you are acting both as a principal in your own right and as an agent of the owner. You must account for VAT on both:
    a) your supplies of prepared food and drink to the owner. You can reclaim any VAT invoiced to you subject to the normal rules
    b) your fee for your services to the owner of the catering facilities for running the canteen

Do you:

Supply meals or drinks free of charge to customers or friends? This is business entertainment and you will not be entitled to deduct any input tax incurred in the provision of the meal or on the purchase of the drinks
Provide free sweets or drinks as part of a meal your customer pays for, such as mints or liqueurs with the bill? Treat this input tax as attributable to the taxable supply of the meal.
Give meals or drinks in exchange for an identifiable benefit to your business, (ie. to coach drivers or party organisers in return for bringing their party to your establishment)? Deduct any VAT incurred but you must account for output tax on the cost to you of these supplies
Supply yourself or your family with meals? You need not account for VAT on those meals. However, you must account for tax on the full cost to you of any standard rated items you take out of stock for your own or your families personal use.
Provide catering to your employees free of charge? Zero rated
Provide catering to your employees where the cost is deducted from their gross wages, as set out in their contract of employment? Zero rated
Provide a vending machine for your employees to use free of any charge? Zero rated

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