A Guide To VAT on Food for Your Business

If you are a food retailer, producer, manufacturer or wholesaler, you will need to know the ins and outs associated with VAT on food. But brace yourself, it’s far from straightforward. In fact, in terms of VAT on food, UK government guidance is extensive to say the least.

For full details on VAT on food and drink, visit the gov.uk web page Food products (VAT Notice 701/14) or Catering, takeaway food (VAT Notice 709/1).

In this blog, we are going to try to simplify the rules around VAT on food as much as possible. But if you are still confused then, as always, please get in touch with our team of accounting professionals. We know the rules and regulations on VAT in the Hospitality sector by heart, and will be happy to help.

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Is VAT charged on food?

The answer to this depends on what sort of food you are talking about. Some foods are zero-rated, whilst others are standard rated. Whether or not you should charge VAT on food also depends on how it is served and the nature of your business.

VAT for Catering

While the supply of most food and drink is zero-rated, anything made in the course of catering is always at standard rate. But what constitutes supplies that are ‘in the course of catering’? 

Is it for on-premises consumption?

You are required to charge VAT at the standard rate for food and drink supplied for consumption on the premises in which it is supplied (i.e. retail outlet, restaurant, cafe, supermarket, or in a paid-entry venue).

Is it hot takeaway food?

The sale of food is at VAT standard rate if it is served hot and:

  • Has been heated in order for it to be consumed hot
  • Has been kept hot after being heated
  • Advertised or marketed in a way that indicates it is supplied hot
  • Been heated to order
  • Provided to customer in packaging that retains heat or which is designed for hot food

Is it within the ordinary meaning of catering?

Catering is defined as supply involving a significant element of service. This can include:

  • Food and drink prepared in restaurants, cafes, canteens and so on, with the exception of cold takeaway food
  • Delivery of cooked ready-to-eat food or meals (whether or not this includes cutlery and/or cutlery)
  • Third party food and drink supplies for events (e.g. wedding receptions, conferences, parties)
  • Supply of cooking or food preparation to a customer in their home (such as a hired chef for a dinner party)

These are examples which are not considered ‘in the course of catering’:

  • Retail of cold takeaway food
  • Groceries
  • Food or drink that requires significant further preparation by the customer

If your food is not supplied in the course of catering, it is usually zero rate. But there are some notable exceptions, which include things such as alcohol, confectionery, ice cream and savoury snacks. A full list of vatable food items can be found on the gov.uk website.

What constitutes food for VAT liability purposes?

An item is considered to be food for human consumption if:

  • The average person, knowing what it is and how to use it, would consider it to be food or a beverage
  • It is fit for human consumption

It includes products that can be eaten as a snack or as part of a meal, and also recognised food ingredients, such as flour.

Medicines and medicated prescriptions, as well as dietary supplements, food additives etc. are not food, even though they are consumed by humans.

Anything which is unfit for consumption by humans, including used cooking oil, contaminated or waste food product,  or anything that can be used for animal feed, may be eligible for zero rating. However, anything that is unfit for consumption by either humans or animals is standard rate (e.g. offal for processing into fertiliser).

What foods are zero rated for VAT?

All supplies of unprocessed foodstuffs for human consumption, including raw meat and fish, fruit and vegetables, cereals, nuts and pulses and culinary herbs are all zero rated.

Most ingredients or additives that are used in home cooking and baking can be zero rated as well, so long as they have some measurable nutritional value or used predominantly in the form in which they are supplied, and are not one of the exceptions identified by regulations.

Perrys Accountants: Hospitality Accountants

As the list of products which are VAT standard rate and those which are VAT exempt is extensive, we would recommend that you check the gov.uk website at the links provided in this blog. And if you need any further information or clarification, then the team at Perrys Accountants is always happy to help.

Accounting for the Food and Hospitality sector is complicated and many-faceted, which is why most companies in the industry choose to use an accountant to manage their tax liabilities for the business. At Perrys Accountants, we are experts in the Food and Hospitality sector, having specialised in this area for many years.

If you have a company which supplies food and beverages, get in touch with us today and find out how we can make your business administration much easier and potentially save you money.

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