VAT Warning - For Cafes and Fast Food Outlets

26 February 2019

Are you over-stating your zero-rated sales?  All food consumed on-premise of a business is standard-rated for VAT, only cold food consumed off-premise is zero-rated. 

There have been many cases highlighted in the media in recent times about VAT charged on food, and the varying exceptions to the rules, so it is worth taking time to ensure you are getting it right if you are in the food catering trade.

Neil Warren, an independent VAT adviser, recently published an interesting article on Accountancy Web regarding his investigation into whether fast food outlets are over-stating their zero-rated sales.  He sets out to order lunch from 5 different outlets and on 3 occasions he is not asked if he would be eating his lunch on the premises or having a take-away – he was charged the ‘take-away’ price i.e. zero-rated. https://www.accountingweb.co.uk/tax/business-tax/vat-warning-to-cafes-and-sandwich-bars

It is important that customers in cafés and fast food outlets are asked if they plan to eat on- or off-premises as this will ensure that correct the VAT application will occur.  Business owners should ensure their staff are properly trained and aware of the VAT implications for food as ultimately it is the business owner who will be liable for any VAT penalties should HMRC investigate.

For more information please read HMRC’s guidance on catering and takeaway food: https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091