If you operate a business, then VAT (Value Added Tax) on goods and services will be something you are familiar with. VAT is applied to the majority of goods and services sold in the UK and is charged as a percentage of the price paid by the consumer. The standard rate of VAT is 20%, and has been at this rate since January 2011.
However, there are nuances when it comes to VAT. Some sectors have different rates of VAT, and the food and drink sector is one of those. Food and drink that is designed for human consumption is usually zero rated. However, some items are liable for the standard rate.
While it can be confusing, it’s important that those working in the food and drink industry understand the different rates of VAT and what that means for their business.
The first thing to understand about VAT rates on food and drink is that depending on whether you are a food retailer, producer, manufacturer, wholesaler or selling food and drink in the hospitality sector, different rates of VAT will apply.
Here, we discuss the various VAT rules for food and drink and explain how they are charged.
Is VAT charged for food and drink?
The short answer is sometimes. There are different rules, depending on the food and drink, where it is sold, and where it will be consumed.
While food and drink for human consumption is usually zero rated, some items have the standard VAT rate of 20% applied to them. These items include food and drink supplied by the catering industry, alcoholic drinks, confectionery, crisps, savoury snacks, hot food, sports drinks, hot takeaway food, ice cream, soft drinks, and mineral water.
What are the VAT rates for food bought in a pub or restaurant?
Restaurants and pubs must always charge VAT of 20% on everything eaten either on the premises or in areas designated for customer use – such as an outside seating area.
This VAT rate also includes food eaten in food courts in places like shopping centres, airports and railway stations.
What are the VAT rates for food bought in a takeaway?
If you run a takeaway, then you must charge the standard rate of VAT on all hot takeaway food and home deliveries.
The 20% VAT charges for hot food include:
- Food that has been heated for consumption
- Food that has been kept hot
- Food that is advertised or marketed in a way that indicates it is hot
- Food that has been heated to order
- Food that is provided to a customer in packaging that retains heat or is designed for hot food
What are the VAT rates for cold takeaway food?
Cold takeaway food is exempt from VAT – unless it is to be consumed in a designated customer area.
What are the VAT rates for food and drink supplied by a caterer?
For those supplying ready-to-eat prepared food and drink as part of a catering service, then you must charge VAT at the standard rate.
This includes:
- Supplying food and drink to events, such as weddings, conferences and parties
- Supplying, cooking or preparing food for a customer in their home, including as a hired chef for a dinner party
VAT regulations state that standard rates should always charged on the following items – regardless of how and where they are sold:
- Alcoholic drinks
- Confectionery
- Crisps
- Savoury snacks
- Sports drinks
- Ice cream
- Soft drinks
- Mineral water
What foods are VAT zero-rated?
All unprocessed foods for human consumption, including raw meat and fish, fruit and vegetables, cereals, nuts, pulses and culinary herbs are zero rated.
The majority of ingredients used for home cooking and baking are also zero rated, providing they have a measurable nutritional value or are used in the form they are supplied.
If you need further information or advice about VAT for the food and drink industry, we are here to help. Please give us a call on 01892 559480, or get in touch with our friendly team via our online enquiry form.
