The basic rule
Most food is zero-rated for VAT. But food supplied in the course of catering is standard-rated at 20%. For restaurants, cafés and takeaways, two things decide which applies: where the food is eaten, and whether it is hot.
Eat-in food
Everything eaten on your premises, including at tables outside that you control, is standard-rated. This applies to hot and cold food and drinks.
Takeaway food
- Hot takeaway food is standard-rated, for example kebabs, pizza, chips and hot pies sold hot.
- Cold takeaway food such as sandwiches and salads is usually zero-rated.
- Some cold items are always standard-rated, including confectionery, crisps, ice cream and soft drinks.
Food is treated as hot if it is heated to be eaten hot, or kept hot after cooking. There are detailed rules and exceptions, for example for freshly baked bread that is simply cooling down.
Set up your till correctly
Most VAT errors in takeaways come from till buttons that do not separate eat-in from takeaway, or hot from cold. Ask staff to record each sale correctly, and review your EPOS settings at least once a year.
How we can help
We review your menu and till set-up, check your VAT returns and help if HMRC asks questions. VAT returns are included in our Restaurant Plus package.
This guide is general information, not advice for your situation. Contact us before acting on it.