We’ve all been in fast food restaurants and been asked when placing our order whether we are eating in or taking away. It’s not the cashier being nosey or allocating you a table to sit at. It is down to the businesses management of Value Added Tax (VAT). Her Majesties Revenue and Customs (HMRC) decide which products should incur VAT and which should be exempt. The business then acts as the treasury’s collection agent by charging VAT at the prevailing rate on the relevant products. The take-away or fast food retailer must always charge VAT on all food and drink consumed on the premises and on hot food taken away. HMRC have stated that any Cold take-away foods are zero rated. Cold take-away products include sandwiches, wraps, yoghurts, cakes and some cold milk based drinks. This excerpt from HMRC Catering notice should provide some clarification –
You must always charge VAT at the standard rate if you make a supply of food and drink for consumption on the premises on which it is supplied. Also, you must charge VAT at the standard rate if you supply hot take-away food (that is, food for consumption away from the premises where it is sold).
It is, therefore, important to know what ‘premises’ means as there will be times when it is not just the outlet where your business is situated.
3.2 What are ‘premises’?
For the purposes of Group 1 of Schedule 8 of the VAT Act, ‘premises’ are the areas controlled by the retailer and/or, those areas which have been specifically provided for the customer to consume the food purchased.
3.3 Evidence and apportionment
Where you make sales of cold food to be taken away from your premises, but also have on-site facilities where food can be consumed, you will need to apportion your sales of cold food between those consumed on the premises (standard-rated) and those taken-away (zero-rated). If you are unable to ascertain the correct liability at the point of sale you must retain satisfactory evidence to support a fair and reasonable apportionment. Records, and the retention of records, are explained in VAT Notice 700 and Notice 700/21 Keeping.
4.1 What is the liability of take-away food and drink?
Hot take-away food and drink is always standard-rated. Cold take-away food and drink is zero-rated, provided it is not of a type that is always standard-rated (such as crisps, sweets, beverages and bottled water).
4.2 What is take-away food and drink?
Take-away food is food sold for consumption off premises.