Understanding VAT on takeaway foods
For every other restaurant, café, and takeaway joint, it is essential to speed up and clearly understand VAT on takeaway foods. As confusing as it might sound initially, you can have a clear overview while grasping the concept. Hence, we have curated this article, assisting you with everything there is to know about VAT on takeaway foods.
Starting with the basics
According to HMRC, takeaway foods can be best defined as the food and beverages purchased and consumed off the campus or premises. Based on the business you are associated with, VAT on food varies significantly:
- There is 0% VAT on any zero-rated products, for instance, the sales of coffee beans.
- VAT is only charged for standard-rated products, including hot drinks.
- The standard VAT rate is kept at 20%, while the reduced rate is kept for hospitality at 5%.
- Alcohol is subjected to 20% VAT regardless of the reduced rate periods.
Metrics of VAT on food and drinks
Any food associated with catering is always subjected to 20% VAT. Foods that require further preparations come under standard-rated VAT.
Tests for items subjected to VAT
If you are serving hot meals, it is one of the preconditions for being subjected to VAT. But, here are also some of the other metrics to meet:
- Is the meal being heated to consume it right away? Applicable to hot coffee, pizza, burgers.
- Is the meal being heated for an order?
- Is there any necessity to keep them hot after cooking?
- Is heat-retentive packaging used?
- Is there any word associated with hot or roasted used for marketing?
Understanding the gray areas: Cold takeaway meals
Just because you are selling cold takeaway meals doesn’t mean your sales are completely zero-rated. For example, some products are specifically referred to as zero or standard rated by HMRC. Some of these common items for standard-rated include:
- Ice-cream/confectionery
- Alcoholic beverages
- Other beverages including juices, bottled waters, smoothies as well as energy drinks
- Potato chips, roasted nuts as well, any other savory snacks
- Any other product subjected to home brewing
Common items for zero-rated includes:
- Baked Alaska, cream gateaux as well as mousse
- Cakes, non-chocolate biscuits, as well as any other dessert delicacies
- Any alcoholic dessert jellies
- Ice-coffee, ice tea, milkshakes, and mates
- Any vegetable-based snacks
The bottom line
Despite all the challenges and grey areas that businesses have to face, they shouldn’t deter from offering takeaways and food delivery services. Their primary concern should be to maximize their overall reduction in VAT charges further, and that the same time looks for maximizing their profits.
Proficient accounting services like Pearl Lemon Accountants can provide you the right assistance for having a clear understanding of VAT on takeaway food. So, what are you waiting for? Get in touch before your VAT returns pile up over time, and establish just the right system based on your business.
My name is Celeste. I am a student at Austin College. I am currently pursuing a business degree and interested in entrepreneurship. She is working for Dr watson. Before my career, I hope to get the chance to travel internationally.
