Delivery app commission fees — how do VAT and allowable expenses work for my café?

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Delivery app commission fees — how do VAT and allowable expenses work for my café?

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I run a small café in London and, like many places nearby, we now take a large share of orders through delivery apps. Customers order through the app, a rider collects the food, and the app company then pays us the order value minus its commission, which is usually between 25% and 30%. At the end of the week I receive one settlement payment, and I am finding it difficult to work out exactly what I have sold, what VAT I owe, and what I can claim as a business expense.

My main question is about VAT on the commission itself. The app invoice shows a fee plus VAT in some weeks, and in other weeks the paperwork looks different, especially when the app company is based outside the UK. Should I treat the commission as a normal VATable expense, claim back the VAT shown, or apply the reverse charge? I also want to know whether the full amount paid by the customer, before commission, is my VATable turnover, even though I never receive that full amount.

I am also unsure how to record delivery sales in my accounts. At the moment I record only the money that reaches my bank account, but that understates my sales and leaves the commission hidden. Should I record the gross sale, then record the commission separately as an expense, and reconcile both to the weekly settlement? If a customer receives a refund or a discount funded by the app, does that change the sale value I should record, and how should I handle delivery charges passed on to customers?

I would welcome a clear, practical method for reconciling app statements each week, and any pitfalls that café owners commonly miss with delivery platforms.

Tagsvat bookkeeping delivery apps commission

Answer 1

JJack David

Yes, you should record the gross sale, not just the money that reaches your bank. That is the most common mistake with delivery apps, and it understates both your turnover and your costs. If a customer pays £100 through the app, that £100 is your sale, even if the platform keeps £28 in commission and pays you £72. Your accounts should show £100 of sales, a £28 commission expense, and £72 in the bank.

For VAT, the customer payment is still your taxable turnover. The VAT treatment of the food itself does not change just because it was ordered through an app: delivered hot food is generally standard-rated, cold food can be zero-rated subject to the usual exceptions, and drinks need to be checked item by item. You must account for output VAT on the full amount the customer pays for your food, not on the net settlement. That matters for the VAT threshold and for any flat-rate calculations.

The commission is a separate business cost, and it is normally an allowable expense for tax purposes because it is incurred wholly and exclusively for your trade. Whether you can recover VAT on it depends on the invoice. If a UK platform charges VAT and gives you a valid VAT invoice, you can normally reclaim that input VAT, subject to the usual rules. If the supplier is outside the UK, you may need to use the reverse charge: you account for UK VAT as output tax and, if you are fully taxable, reclaim the same amount as input tax, so the net effect is often nil, but it must still be shown on your VAT return.

A practical weekly routine helps. For each statement, record gross sales by VAT rate, less refunds and app-funded discounts, then commission, any VAT on commission, and the settlement. Reconcile the result to the bank payment and investigate any difference before you close the week. Check whether a discount was funded by you or by the platform, because a discount you fund reduces your sale value, while a platform-funded promotion should not. Also check delivery fees: if the customer pays you for delivery, that is normally part of your supply, not a separate exempt item. Keep every platform invoice and statement, and do not net commission off sales in your bookkeeping.

Delivery app commission fees — how do VAT and allowable expenses work for my café?

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