VAT on 'free' drinks & food

VAT on 'free' drinks & food

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If a restaurant gives 'free' food and drinks, the 'sale' goes in to the sales figure and VAT accounted for.

The 'cost' of the food/drink is included in the normal purchases, but the sales ledger shows the 'free' items as still owed. When this gets adjusted, can the VAT on the 'free' sales be 'reclaimed' to give a VAT neutral position?
Steph

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By theaardvark
05th Feb 2007 15:30

Huh?
Is the restaurant giving away food to someone who is not otherwise buying a meal? Does it give more than £50 to any one person in the course of a year?

I would have thought:

If the restaurant is giving freebies to someone who is purchasing other food, surely VAT need only be accounted for on the money received.

If the restaurant is giving freebies to someone not buying anything else, then surely it will be worth less than £50 and the supply therefore disregarded. No output VAT will be due.

Regards

Paul Taylor
Senior VAT Consultant
Dains

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By User deleted
05th Feb 2007 16:10

Free food/drinks
Hi Paul
Thanks for the comment. Sometimes there are gift vouchers for the 'free food' that goes through the till, other times there are visitors/bands/entertainment that are given drinks 'on the house'. Does this make any difference?
Thanks
Steph

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By steph.beeston
06th Feb 2007 17:31

Hmm
Hi Ian
There are some vouchers with 'face value' given out (prizes etc etc), and some of them are for staff/management drinks/meals.
The main one is bands that perform are given 'free' drinks on the night they are there. They need to go into sales for GP monitoring purposes, but should there be an opposite cost (and therefore VAT neutral) in the entertainment heading?
Thanks
Steph

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By steph.beeston
07th Feb 2007 16:46

Great :)
Hi Ian

Many thanks for this - I think this will cover everything I need :)
Steph

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