Food and drink VAT rates explained

If you operate a business, then VAT on goods and services will be something you are familiar with. However, for those working in the food and drink sector, it can be complex and confusing. 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 rates for food and drink and explain how they are charged.

Is VAT charged for food and drink?

Food and drink VAT rates explained

The short answer is "sometimes". Food and drink that is for human consumption is usually zero-rated. However, for some items the standard VAT rate will apply. These include food and drink supplied by the catering industry, alcoholic drinks, confectionery, crisps, savoury snacks, hot food, sports drinks, hot takeaways, 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 on everything eaten either on the premises or in areas designated for customer use. This includes 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 VAT on all hot food and home deliveries. However, you do not need to charge VAT on cold takeaway food, unless it is consumed in a designated customer area.

The 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 food and drink supplied by a caterer?

For those supplying ready-to-eat prepared food and drink as part of a catering service, then the standard rate of VAT will also apply. 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

As already mentioned, standard rates of VAT are 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.

Pandemic support scheme - food VAT rate deduction for pubs and restaurants

While the standard rate of VAT is normally 20%, for food and drink sold in pubs and restaurants, a reduced rate of 5% will apply until the end of September 2021. After this, the rate will increase to 12.5% for a further six months, before returning to the usual 20% in April 2022.

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.

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