VAT treatment of free meals in restaurants

VAT treatment of free meals in restaurants

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A restaurant often provides meals free of charge to special guests, and sometimes friends of directors.  What is the correct treatement of VAT in this case? Does the output tax need to be declared for the usual sale price of the meals, or can just the input tax of the cost of those good be disallowed instead?

The restaurant also provides a free meal to their entertainers (non-staff) - I assume this falls within business entertainment.  Again, what is the correct VAT treatment?

Thanks for your help.

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Euan's picture
By Euan MacLennan
29th Feb 2012 10:45

VAT guidance

This is covered by VAT Notice 709/1, paras. 5.7 & 5.8.

Free meals for non-staff entertainers are not covered by the exception for employees, so should be treated as entertainment.

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