We have recently taken on a client who sells takeaway food - some of which is standard rated, some of which is zero rated.
As part of their offers, they offer a meal deal - which basically consists of a main dish (standard rated), and any two additional dishes (can be either both standard rated, both zero rated, or one of each).
How do I calculate the output VAT on this?
Say the sale price is £11.00, and is made up of a standard rated main dish of £8.00, a standard rated 'side' of £3.00, and a zero rated 'side' of £2.50, is it enough to say this:
Main: 8.00 (VAT = 1.33)
Side 1: 3.00 (VAT = 0.50)
Side 2: 2.50 (VAT = 0.00)
Total: 13.50 (VAT = 1.83) - therefore VAT rate = 13.55%
Sale price of deal = 11.00, therefore VAT = 1.31 (11.00 x 13.55/113.55)
Or is there a different calculation I need to make?
Replies (2)
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Depends
Without knowing the full details it is difficult to give a complete answer. However I have two initial thoughts which go against each other.
Firstly you client is offering a discount and that can be applied against which ever meal he decides so you could argue that a £2.50 discount has been applied against the 20% VAT item within the deal.
Secondly your client is offering a single supply "meal deal" and that the whole "meal deal" is subject to VAT.
Or neither and....
you could read Section 6 of HMRCs notice on Business Promotion Schemes which covers Meal Deals...
Hint: It's an apportionment you need and HMRC don't acept the argument that it's a variable discount against whichever item means you have a VAT liability. Boots tried that to tribunal or appeal level and lost (IIRC which I don't always do!)