Any Café with any area set aside for the consumption of food by customers, supplying food or drink to be consumed in the Café, or any additional food consumption area (for example chairs on the pavement outside your café), will have to pay the Standard Rate of VAT on the food and drink sold for that purpose.

What if I also sell cold food to be eaten as take away by the customer?

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 saleyou must retain satisfactory evidence to support a fair and reasonable apportionment. Make sure that the cold food items follow the VAT liabilities as described in Notice 701/14 Food

How about Hot takeaway drinks?

These are always Standard Rated

Hot takeaway food?

If the food (or any part of it) is hot at the time it is supplied to the customer and any one of the following tests are met, then the food is standard rated:

• It has been heated for the purposes of enabling it to be consumed hot
• It has been heated to order
• It has been kept hot after being heated
• 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
• It is advertised or marketed in a way that indicates that it is supplied hot

What if I have a microwave so the customers can heat up their food themselves?

This is still seen as fulfil the tests above so the food would be standard rated.

What about hot food with a cold ingredient (i.e. Hot dog)

This is standard rated.

I have a deal where you can buy a takeaway burger, chips and a milkshake; do I need to pay VAT?

If you sell hot and cold items at an inclusive price, you will need to work out the tax value of each item in order to calculate how much VAT is due on the standard rated items.

What about Salt and Ketchup?

Condiments supplied at no charge to the customer can be ignored for VAT purposes.

There is a vending machine in my café, is that liable for VAT?

All supplies of food and drink from vending machines in café’s 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 premises.

I deliver cold food and drinks such as sandwiches and bottled drinks from my café do I have to pay VAT?

So long as the food is cold then that is not catering for the purpose of calculating VAT and you only have to follow the advice in Notice 701/4 Food

I sometimes provide packed lunches to events or functions, are these VAT liable?

Yes- the HMRC considers this to be catering even when it’s done by a café and you will have to pay standard rate VAT

Do tips and service charges attract VAT?

If you have a compulsory service charge then that sum attracts the standard rate of VAT, however if you allow customers to leave a tip if they wish then any money they leave is zero-rated.

I run my own Café, acting as a principle, how do I account for VAT?

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.

My Café is based in someone else’s business, (i.e. I run a café in a separate business, run by someone else) how should I account for VAT?

You must account for VAT on:

• Any supplies of catering or hot take-away food. You can reclaim any VAT charged to you under the normal rules
• Sales of other standard rated items of food
• Your fee to the owner of the catering facility
• 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
• You must account for VAT on your supplies even if the owner of the facilities makes exempt supplies

My café is based in someone else’s business, and I sometimes supply that business with food or drink (i.e. meals for events they are having), as well as running my café in their premises. How do I account for VAT?

You supply food and drink to the owner of the catering facilities and then you prepare and serve it to the users of the premises on the owner’s behalf, so 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:

• Your supplies of prepared food and drink to the owner. You can reclaim any VAT invoiced to you subject to the normal rules
• Your fee for your services to the owner of the catering facilities for running the canteen.

I sometimes supply meals or drinks free of charge to customers or friends, do I need to pay VAT on this?

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.

I like to provide free sweets or drinks as part of a meal my customer pays for, such as mints or liqueurs with the bill, I this VAT liable?

Treat this input tax as attributable to the taxable supply of the meal.

I give meals or drinks in exchange for an identifiable benefit to my business, (i.e. to coach drivers or party organisers in return for bringing their party to my café, do I need to pay VAT on this?

Deduct any VAT incurred but you must account for output tax on the cost to you of these supplies.

What about when I supply myself or my 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.

I provide meals to my employees free of charge, does this attract any VAT?

These meals would be zero rated.

My employees eat at the café and the cost is deducted from their gross wages, as set out in their contract of employment, is this VAT liable?

These meals would be zero rated.

There’s a vending machine in my café which my employees can free of any charge, does this follow the same rules as other vending machines?

No, these goods would be zero rated.