Many business in the food industry provide take away foods ready to eat from restaurants and cafes, bakery's, deli's and many more. 

If this is something you're considering for your business and you're VAT registered, there may be some items you can sell a little cheaper to your customers, VAT free.

Most raw food ingredients and unprocessed foods 'fit for consumption' are zero rated. But when ingredients are put together to produce a meal or snack, it usually becomes vatable. 

There are also confusing rules regarding hot and cold food and drinks.

The rules are somewhat complicated and mind boggling to understand so we'll break it down for you here as easily to understand as possible....

Starting with some of the simpler things.

Takeaway items that ALWAYS include VAT

Snack items

• Sweets
• Chocolate and bars of chocolate
• Ready to eat popcorn
• Compressed fruit bars
• Ice creams, sorbets, ice lollies & frozen yoghurts
• Potato crisps
• Roasted and salted nuts (out of shells).
• Hot snacks and meals.

Drinks

• Alcohol
• Alcohol-free beers and wines
• Bottled water
• Fruit cordials and squash drinks
• Fizzy drinks (cola, lemonade etc...)
• Sports/Energy drinks
• Teas (including herbal) & coffee (if hot)
• Hot chocolate

Takeaway items that you can ZERO rate

Snack items

• Made to order cold sandwiches
• Bread
• Cakes, including sponge, fruit, meringues and celebration cakes
• Flapjacks, cornflake and other cereal cakes, millionaires shortcake, lebkuchen.
• Toffee apples
• Biscuits - plain or coated in icing (not chocolate)
• Tortilla chips and corn snacks
• Roasted lentils
• Unshelled roasted, salted or plain nuts.
• Vegetable crisps not made of potato.

Drinks

• Milkshakes
• Milk, including soya, coconut, almond etc
• Meal replacement/slimmer drinks
• Iced teas
• Iced coffee

What's the deal with chocolate on biscuits?

A chocolate biscuit can be zero rated IF it meets these conditions:

Chocolate chip biscuits where the chocolate is baked into the biscuit.

Bourbons or other, where the chocolate is in the middle and not on the outside.

Jaffa cakes - it's a cake anyway, not a biscuit, fact! 

Where a chocolate biscuit is COATED either partly or fully, you've got to apply vat on it.

The funny one I've saved until last. Our humble Gingerbread men can have 2 chocolate eyes and pass for zero rated, but if you go adding buttons with chocolate or any other chocolate decoration to pimp the little man up, he becomes 20% more expensive.

This covers most cold food items to take out which you may be thinking about selling to customers to consume off the premises. So now we've completed the warm up, let's move on from the cold stuff.

HOT food! What's hot and what's not?

As a rule, it's all standard rated 20% If any part of the food or drink supplied to takeaway is hot. Except! If these 5 tests are met, it can be zero rated.

The 5 tests!

IF the hot food has: 

• been heated for the purposes of enabling it to be consumed hot
• been heated to order
• been kept hot after being heated
• provided to a customer in packaging that retains heat (whether or not the packaging was primarily designed for that purpose) or in any other packaging that is specifically designed for hot food
• advertised or marketed in a way that indicates that it’s supplied hot

I'm going to use a sausage roll as our example here.

The 1st point - heated to be consumed hot.

Example: a sausage roll has been cooked to enable it to be eaten. It's still slightly warm but it's given to you in a paper bag to takeaway to eat, by which time it will be cold. This meets this condition to be sold as zero.

2nd - Heated to order.  

If the sausage roll was cold and you asked for it to be heated = standard rated. 

3rd - Was it kept hot? 

This includes heated cabinets, ovens, hot plates which would make it 20% vatable.

If it was left to cool in a natural room temperature place like a window or non-heated shelf, this would pass this test for zero rated.

4th -  Packaging.

Foil lined boxes and bags and special insulated packaging are made to keep food hot. Using these would result in your takeaway food being vatable.

A paper bag or other non-insulated packaging would pass this test for zero rated supply. 

5th - How are you going to advertise it? 

"Hot sausage rolls" - standard 20%

"Freshly baked" - passes zero rated supply test.

ALL 5 of these tests have to be met to rate the supply zero rated, or it's a hot food.      

Need help getting it right?

We'd  love to hear from you and help you to get things perfect for your business. 

From guidance to helping you to input the different rates into your til system, we can find what works to take the stress off your hands. 

We'd  love you to get in touch.

Now...who's hungry?