VAT on Food

When determining whether or not the food you offer is non-taxable, the three most important questions to ask are as follows:

• Does the food itself come under standard VAT rates or the zero-rate exemption?
• Are you selling food hot or cold?
• Do you provide food for in-house consumption or takeout customers?

VAT applies to a wide variety of meals sold through various distribution channels; however, the regulations might vary depending on the kind of food and the circumstances. If you want to understand how the VAT on food impacts your business, an excellent place to start is with the basic guidelines that the government provides on VAT:

• Typically, foods and drinks intended for human consumption are zero-rated.
• Items such as Catering, alcoholic beverages, confectionery, crisps and other savoury snacks, hot food, sports drinks, hot takeaways, ice cream, soft drinks, and mineral water are all standard-rated.
• VAT is primarily required to be paid in restaurants.
• Value-added tax must be included in the prices of all hot takeaways and restaurant deliveries.
• There is no requirement to charge VAT on cold takeaway food, provided the food is not intended to be eaten at tables within the takeaway or in a designated area.

All unprocessed items intended for human consumption, including fresh produce, are assigned a zero rating.

• eating uncooked meat and fish
• fruit and veggies
• Grains, nuts, and dried beans and peas
• Cooking herbs

Most products or ingredients used in home cooking and baking can be zero-rated as long as they contain a quantifiable nutritional value or are utilised mainly in the form they are sold. The government supplies a wealth of information on gov.uk, and businesses should read the guidance. Our clients in the food and hotel industries enjoy the assistance of experienced accountants specialists in VAT who ensure that their VAT returns are correct.

Anything prepared “in the course of catering” is always subject to the standard rate of VAT, even though the vast majority of food and drink supply is exempt from VAT. Food and drink supply and a significant service component define Catering. This can include the following.

• Food and drink, except cold takeaway food, is made in restaurants, cafes, canteens, etc.
• The pre-prepared hot foods or meals (regardless of whether they come with utensils and/or tableware).
• Food and drink distribution for events handled by a third party (e.g. wedding receptions, conferences, parties)
• The supply of cooking or food preparation services to customers within their homes, such as a dinner party.

The following are some examples that are not considered to be “in the course of catering” and are therefore exempt from the tax:

• Takeaway food when served cold.
• Groceries
• Food or drink that requires the customer to do a significant amount of additional preparation before consuming it

The value-added tax (VAT) rate that applies to food producers is established according to the type of food processing, as well as the tax status of the final product (zero-rated or standard-rated). The advice given by the government regarding the processing of food breaks down the various types of food production into categories and provides examples of each. Our VAT specialist accountants can help you understand the multiple issues regarding VAT on food production.