How to Charge VAT on TakeAway Food
If you’re running a restaurant, bar or cafe, and regularly sell takeaway food, you will need to be up to speed on how to charge VAT on TakeAway Food.
We are going to be running a series of blogs on issues for indie food businesses, so do get in touch if there’s a particular topic or issue you’d like help with, or would like us to feature.
There is very detailed guidance on VAT on takeaway food from HMRC, which you can read here, but make sure you have a few hours spare, and have a degree in HMRC jargon!
Alternatively, read on for a lighter guide:
So firstly, let’s get a few things straight about VAT on TakeAway Food:
Look away now if your business is not registered for VAT. You don’t need to worry about VAT at all at the moment. If you’d like a chat about VAT and whether you should be registered, give us a ring on 01432273400 or get in touch by email.
If you don’t sell takeaway food, you can also look away now! If you’re thinking about it, then do read on, as it may affect your decision!
What counts as takeaway food?
HMRC’s definition is any food or drink purchased to consume off the premises.
You have premises and sell takeaway food
If you serve food and drink on the premises (not to take away) then you have to charge VAT on everything, simples.
Examples of premises are:
a whole restaurant area
an area with tables and chairs in a retail complex, for the use of customers only
an outdoor area with tables and chairs, for the use of customers only
seating area in a supermarket, providing food and drink
stall in a sports stadium, amusement park etc with facilities for use of customers
Basically any area with tables and chairs specifically for the use of your customers
If in doubt, check with us or HMRC (choose us, every time, let us deal with HMRC for you!)
The easy bits
Hot take away food is most likely to be standard rated for VAT (the current standard rate is 20%) but there are certain tests (more below).
Hot take away drinks are standard rated (20% VAT).
Cold take away food and drink is usually zero rated for VAT. Unless it’s usually standard rated (this includes things like crisps, sweets, bottled water etc). Bottled water is standard rated! Crazy but true!
Tests for 20% VAT on hot take away food
OK so this is the not so fun bit, and I’d strongly suggest you get some advice on this. The rules are quite long-winded, but here’s the straightforward bits.
Hot food is 20% VAT if one or more of the 5 following tests are met:
1. it’s been heated for the purposes of enabling it to be consumed hot
2. it’s been heated to order
3. it’s been kept hot after being heated
4. it’s provided to a customer in packaging that retains heat or in any other packaging that is specifically designed for hot food
5. it’s advertised or marketed in a way that indicates that it’s supplied hot
So if it’s hot because you’ve just baked it (think sausage rolls, muffins etc) but usually served cold it will be zero rated.
I just don’t get it
It’s not straightforward, is it? My suggestion would be to apply each of the tests above to your specific takeaway menu, then it will make more sense. For instance – hot baked potato: think through the 5 tests above, do you think you could say yes to more than one of them? I think you could say yes to all 5 tests for a baked potato. Still don’t get it? You need to come and talk to us!
OK how on earth do I make sure I’ve got this right?
To get it right you need to make sure:
a) you’re charging the right amount to your customer and
b) you’re declaring the right amount on your VAT return
We’d always recommending automating this bit, and using EPOS software that links into your accounting software (we love Xero by the way). It would be a nightmare to try to calculate and record every sale as you made it, and would massively slow down your serving times.
How do I get my EPOS/till system to record the correct price and VAT?
Firstly you can add all of the food and drink products that you sell into your EPOS, adding the correct VAT rate where you know it. You know what I’m going to say – do your research or get advice on the correct VAT rates before entering all your products into your software!
The best EPOS software will allow you to put different prices for products that you serve on the premises or takeaway. That way you can choose the correct one when you sell it.
If your EPOS software doesn’t have a feature to add a different price you will have to add a separate product for each takeaway item, with the correct price and VAT.
At the end of each day, your EPOS will send the correct sales and VAT information to Xero, so that this information is ready and waiting on your next VAT return.
And what are the best EPOS systems?
We’re always reviewing and researching the best apps out there, so stay tuned for a product comparison blog. In the meantime, the EPOS solutions that offer separate takeaway prices are Kounta, Nobly and IntelligentPOS. However, we are currently checking how these integrate with Xero, as they’re not ideal at the moment. We’re also Vend Partners, which does have a great integration with Xero, but more specifically suited to small shops, not hospitality businesses.
If you’d like more help on EPOS solutions, please get in touch, and keep checking back on our blog for more info.
I hope my blog has made a bit more sense to a very confusing VAT issue! We’re always here to help if you need us.
Thank you for reading!
Kinder Pocock are an approachable cloud-savvy firm of accountants based in Herefordshire but supporting businesses on the move.
We specialise in Indie Hospitality, Security and Design.
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