Tax Advice

VAT in the food industry

17 Jun 2019

VAT in the food industry

VAT can generally be tricky to get your head around at the best of times but when it comes to the world of catering it’s a whole new kettle of fish.

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Zero the hero

So before we go any further let’s remember that this applies to only businesses who are VAT registered e.g. over the VAT threshold of £81,000 turnover or voluntarily. If you would like to find out why you might voluntarily register for VAT and how that works for some food traders then read our VAT Explained article before you delve into this one.

Now, you may know that some foods are zero rated and some are standard rated, for example, cakes are zero-rated (0% VAT charged) and biscuits are standard rated (20% VAT charged). But do you know that regardless of whether it’s zero or standard rated, if you want to eat food inside the café or restaurant in which you purchased it you will be charged VAT.

And do you know that if it’s served above ambient room temperature then even if you take it away you will be charged VAT.

The mind boggles doesn’t it but don’t worry we are on hand to put you straight. Who would’ve thought you could explain VAT with Sushi but that’s just how we roll (see what we did there).

Blowing hot and cold

Ok so let’s look at our variables. First we have the food itself, is it zero or standard rated? Then we have the temperature, is it hot or cold? Then we have the environment, is it eat in or take away?

So if you’re a food store owner e.g. a green grocer then you only have to worry about the first variable but the next two come hand in hand.

Like we said, if the food is take away you do not have to charge VAT unless the food you are serving attracts VAT anyway, e.g. is standard rated, or if it is hot. So we have to look at two variables is it zero or standard rated or is it cold or hot.

If you are running a take away business and you would like to serve hot food or if you are a restaurant and you would like to serve cold food you will have to charge VAT. If you are a take away business and you want to serve cold food you do not need to charge VAT (unless the product attracts VAT in itself) but if you are a restaurant you must charge VAT on cold food.

In a nutshell restaurants must always charge VAT on everything except food that is cold and taken away, takeaway vendors do not need to charge VAT unless the food is hot and/or the customer would like to eat in perhaps a designated sitting area.

The Sushi Saga

So here’s where sushi comes into our explanation.

Traditionally Sushi is raw fish accompanied with cooked rice which seems simple enough until you want to sell it in a takeaway shop. Back to our variables, is it zero or standard, is it hot or cold, is it eat in our take away?

All uncooked meat including fish is zero rated but this is where it becomes taxing. Like we said, all food which is consumed where it is served, whether it be cooked, uncooked, hot or cold, is subject to standard rate VAT charges. All food which is taken away is subject to zero-rate VAT charges, unless, it is cooked and served immediately.

Based on the above we can agree that that sushi, comprised of raw fish and cooked rice which is chilled, is zero rated and it will remain zero rated if it is taken away.

But what if you want to introduce a seating area to a takeaway shop? You must charge standard rated tax on any sushi which is prepared, bought and consumed on the premises regardless of what it’s comprised of or what temperature it is.

Whether you’re a sole trader, a small business, or a larger organisation, our team of experts have the experience to deliver a solution specifically tailored to meeting your tax needs. Why not get an Instant Quote and see for yourself how we can help you?

Keir Wright-Whyte


Managing Director

0207 043 4000

About the author

Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities.

Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors.

He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm.

Keir's primary role is to ensure that new clients with complex businesses or needs are on-boarded in the best way and he is a "trouble shooter" both for clients and where complex issues arise internally. He also helps the accounting teams strive to improve what we do for clients, whether processes or services.

When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling.


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