The rules on VAT charged on food can be confusing, as often the rules vary depending on where and how the food is served.
This blog will break down the VAT rates applicable to different types of food, highlighting the distinctions between hot and cold food, and food consumed on or off the supplier’s premises.
(Read Time: Approx. 4 minutes)
Topics Discussed:
- Differences in VAT rates for hot and cold food, and whether consumed on or off-premises.
- Understanding the VAT implications for catering and takeaway services.
VAT on Food and Catering
The VAT treatment of food can be confusing due to different rules based on the nature and context of the sale.
Generally, food sold in supermarkets might attract different VAT rates compared to the same sold in cafes or restaurants.
Moreover, whether the food is hot or cold, and where it is consumed—on or off the premises—also affects the applicable VAT rate.
Catering Services
When food or drink is supplied in the course of catering, it is always subject to the standard VAT rate, currently set at 20%.
Catering involves a significant service element, such as in restaurants, food delivery services, or event catering.
Specific examples of catering include:
- Restaurants and cafes
- Catering for events such as weddings or parties
- Delivery of cooked food
- Any contract-based catering services
Outside of these, any food or drink provided for consumption on the premises or any hot food, regardless of where it is consumed, also falls under the standard VAT rate.
VAT on Hot Food and Drinks
The term ‘premises’ extends beyond the immediate physical space of the food outlet.
It includes any area set aside for customers to consume food, even if shared with customers of other establishments.
Examples include:
- Indoor seating areas of a café or restaurant
- Outdoor tables provided by the establishment
- Shared dining areas in food courts
According to the ruling in Compass Contract Services UK Limited v HMRC, the definition of ‘premises’ has been expanded to cover all areas controlled or used by the retailer for customers to consume their purchases.
VAT on Hot Food and Drinks
Not all food is subject to VAT.
Certain food items remain zero-rated, provided they are not intended for consumption as part of catering services.
These include:
- Most basic foodstuffs for human consumption
- Animal feed
- Seeds and plants used for food production
However, there are exceptions. Certain items, though generally food, can be standard rated if they fall into specific categories defined by HMRC, such as confectionery, beverages, and some savoury snacks.
The categorisation often depends on how the food is presented, labelled, and marketed.
Summary
Understanding the VAT implications on food can be intricate due to varying rates depending on its type, its temperature, and where it is consumed.
Catering services and hot food items typically attract the standard VAT rate, while certain basic items may be zero-rated.
Given the complexity, businesses in the food and hospitality sector should ensure they are correctly applying VAT rules to avoid potential liabilities.
For personalised advice and to ensure your business complies with VAT regulations, contact Tax Expert today.
Fill out our form here for any questions, give us a call at 01772 788200, or message us on our WhatsApp for out of office hours.
Kind regards,
Ilyas Patel