Tax Advice for Food Industry Professionals

VAT advice for food industry professionals.
VAT rules depend on dine-in or takeaway food.

If you’re in the food business, you’re probably already very aware that VAT rules for the food industry are complex. But, for all the consumers out there who aren’t aware, let’s lay a little groundwork. According to HMRC, cafes and restaurants pay VAT on some of the food and drink they supply to the public, but not all. How do you know which items are VAT-able? Two easy questions:

1 – is the food sold hot?

2 – is the food and drink consumed on site?

If the answer to these two questions is “Yes”, well, that’s an indication that someone needs to pay VAT and that 20% tax is, understandably, passed onto the end user (aka, the hangry person who just needs a hot meal now).

A Moveable, Taxable Feast.

We’re leaving nothing to chance. Here’s a quick Yes / No exercise to sharpen our VAT rules for the food industry identification skills. What do you think? Are the following examples subject to VAT or not? 

Cold take-away food can be exempt from VAT.
Hot food is always subject to VAT.
  1. A cold takeaway sandwich from a cafe fridge and eaten in the car
  2. A hot takeaway mutton vindaloo enjoyed outside the pub
  3. A cold takeaway panini warmed up and eaten in the garden centre cafe
  4. A mixed fruit trifle from a supermarket shared with friends at a home party

Answers:

  1. No VAT
  2. Yes VAT
  3. Yes VAT
  4. No VAT, but you lose points for the mixed fruit. What next? Jelly?

BiGRoC Accounting Serving Hot Tips to Food Providers

Pricing details, VAT rules, ingredient cost cover, labour, rent, etc. all come together to create a recipe for a five-star headache. Here are a few specific tips we specifically recommend to clients working in the food and hospitality industry.

  • Invest in the best till/POS system you can afford. Program prices carefully and use the inbuilt software to its full potential. This will go a long way to keeping accurate records and making sure no mistakes are made with charging, or neglecting to charge, VAT on appropriate items.
  • Guard supplier invoices and card receipts with your life. Keep them well organised and store them safely, as these are essential for claiming back VAT later down the line.
  • Stay informed and up to date on HMRC policy. They don’t always take kindly to claims of ignorance. Check your lineup against this HMRC document.

Not Enough Accountants Spoil the Soup

Accounting advice for food industry professionals.

So as you can see, the system seems simple, but there’s a host of grey areas and what-ifs: food vans serving ice cream at a county fair, gourmet burger bbq van in a pub car park, vending machines serving hot and cold drinks, and then there’s the fancy biscuit issue (see here if you’re not sure what we mean). Don’t leave these big questions to ChatGPT – our friends in AI don’t always see eye to eye with our friends in the gov office, and you really deserve to have advice tailor-made to your specific setup. 

Find definitive answers to your VAT rules for food industry questions in clear, simple terms by setting up a no-obligation chat, or drop us a message on WhatsApp here: 0151 662 0669.


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