Restaurants & Takeaways

Restaurants and VAT treatment

Restaurants can use the Flat Rate Scheme (FRS) for VAT if they meet the eligibility criteria. The Flat Rate Scheme is designed for small businesses with a VAT-exclusive annual taxable turnover of up to £150,000. Businesses must apply and be approved by HMRC to use the scheme VAT guide (VAT Notice 700).

Under the Flat Rate Scheme, businesses apply a fixed flat rate percentage to their gross turnover to arrive at the VAT due. The fixed rate percentages vary depending on the type of business 2. Basics of the Flat Rate Scheme. For restaurants, the specific flat rate percentage is determined by HMRC based on the trade sector the business is in DMBM530840 Interventions To Encourage Compliance.

To summarize:

Restaurants are eligible for the Flat Rate Scheme if their VAT-exclusive annual taxable turnover is £150,000 or less and they meet other eligibility criteria VAT guide (VAT Notice 700).

The flat rate percentage for restaurants is determined by HMRC based on the trade sector DMBM530840 Interventions To Encourage Compliance.

For more detailed information, businesses should refer to VAT Notice 733: Flat Rate Scheme for small businesses VAT guide (VAT Notice 700), DMBM530840 Interventions to Encourage Compliance.

For restaurants, the VAT treatment of food and drink supplies is governed by several specific rules and regulations:

Hot Takeaway Food: VAT must always be charged on hot takeaway food as it is considered a standard-rated catering supply. This applies regardless of the customer's intention, the place of consumption, or whether the food is collected or delivered Liability ― food and catering, 4 April 2005 Hot take-away food.

Food and Drink Consumed on Premises: VAT should be charged on supplies of food and drink that will be consumed on the premises from which it has been supplied. The term 'premises' includes all areas set aside for the consumption of food, such as tables and chairs on the pavement outside a café, food courts in shopping centres, and similar shared eating premises Liability ― food and catering.

Catering Contractors: If a catering contractor runs catering facilities on someone else's premises as a principal, they must account for VAT on any supplies of catering or hot takeaway food and drink. This includes reclaiming any VAT charged to them under the normal rules, sales of other standard-rated items of food and drink, their fee to the owner of the catering facility, and any subsidy received from the owner Catering, takeaway food (VAT Notice 709/1).

Zero-Rated and Standard-Rated Supplies: Most food is zero-rated for VAT purposes, but there are exceptions. For example, confectionery, certain beverages, and hot takeaway food are standard rated. Businesses need to apportion their sales of cold food between zero-rated and standard-rated supplies if they make both types of supplies Liability ― food and catering.

Special Rules for Specific Sectors: There are exemptions and special rules for certain sectors, such as schools, universities, colleges, hospitals, clinics, and nursing homes, where the supplies may be exempt from VAT  Catering, takeaway food (VAT Notice 709/1).

The selling price of hot food is inclusive of VAT. According to the VAT guidelines, hot takeaway food and drink are standard-rated for VAT purposes, meaning that VAT should be charged on these items 4 April 2005 Hot take-away food. This implies that the price customers pay for hot food includes VAT, as businesses are required to account for VAT on these sales.

Additionally, it is clarified that VAT should always be charged on hot takeaway food as this is a standard-rated catering supply Liability ― food and catering. This further supports that the selling price of hot food includes VAT.

Therefore, when hot food is sold, the price displayed to customers is inclusive of VAT, ensuring compliance with VAT regulations.