If you own a restaurant, cafe or bar and deal with takeaway food on a daily basis, you need to know how to charge VAT on takeaway food. You can get a detailed guide on it on the HMRC website. However, if you don’t have enough time, consider this post a good alternative.
In this regard, you also need to know that there are few temporary changes to VAT rates on some food supplies and drinks due to the Covid-19. Although it is good news, still it has given birth to confusion that what VAT you need to charge to your customers?
Let’s find out!
Look away this post, if you’re not VAT registered or don’t sell takeaway food, but if you’re thinking about it you need to read this post to make the right decision.
Changes Due to Covid-19
In the 2021 budget, the government has extended the reduced rate of 5% in many foods and drink supplies that were normally subject to the standard rate of VAT at 20% until September 2021. But currently, it has been raised to 12.5% till 31 March 2022.
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What is Takeaway Food?
As per the definition of HMRC, the takeaway is food that is consumed or used off the premises. To put it simply, if we take away food from a restaurant to home or anywhere else, it comes under the category of takeaway food.
If your restaurant or bar has enough space to serve food, you are allowed to charge VAT on all the items that are sold within your premises. Your premises can be any area with a table and chairs for your customers, including:
- A restaurant area
- An outdoor area with tables and chairs
- An area with tables in a retail complex
- Stall or canteen in a stadium or amusement park
VAT on Hot Takeaway Food
Hot takeaway foods and drinks are hot at the time when they are served to the customers. The VAT on these items is 20% standard rate VAT (or temporary rate of 12.5%). Moreover, they need to meet one or more of these 5 conditions:
- it has been heated to consume hot, order and kept hot after being heated
- advertised in a way that indicates that it’s supplied hot
- served to a customer in a package that retains heat or in any other packet that is specifically designed for hot food
Those items that are heated/baked but served cold will be charged a zero-rate VAT.
Whereas, cold takeaway food is typically charged with zero rate VAT. However, few items are standard rated, like:
- Bottled Water
- Crisps and so on
Things to Consider
You need to make sure that:
- you charge the right amount of VAT to your customers
- you declare the accurate amount on your VAT return
In this regard, it is recommended to automate your processes by taking advantage of EPOS software and connect it with your accounting software. This would make the process fast and efficient by saving you considerable time, money and stress.
How to Charge VAT on Takeaway Food?
Firstly, you need to list down all the food and drink products you sell into your Electronic Point of Sale (EPOS) and include the correct VAT rate which you are aware of.
The EPOS software will let you put different prices of products that you deal with on the premises or takeaway. This will allow you to choose the correct one when selling.
If the EPOS doesn’t allow you to include different prices, you will have to add a separate amount for each takeaway item, with the accurate VAT and price.
At the end of the day, your EPOS will transfer the accurate sales and VAT information to your accounting software, so that your information will be ready for your next VAT return.
Quick Sum Up
To sum up the discussion of how to charge VAT on takeaway food, you first need to know the correct VAT rate of takeaway food that is normally standard rate but currently, it is 12.5% till 31 March 2022 on a temporary basis.
In this instance, you also need to consider whether you are serving hot or cold takeaway foods and drinks. Generally, cold takeaway foods are charged a zero-rated VAT. In addition, you need to charge the right VAT amount and declare it accurately on your VAT returns. The EPOS, along with accounting software will make the process easy for you.
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Disclaimer: This blog is just a basic overview of VAT on takeaway foods.