Pop up catering query

VAT

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I have a client who operates as an external caterer for a pub. It's been on an ad hoc and irregular basis for about a year. The place only provides food when my client is there. Client buys food, waiters and is liability insured. The pub till records food and drink income separately. The pub has been withholding 20% of food takings as they have to pay VAT on it. The client's business is now approaching the VAT threshold and they need advice. He's asked if the pub will pay him the full amount once he's registered as he will be accounting for VAT separately with the pub invoicing him for commission. The pub are reluctant to do this as they think the full takings should go through their accounts 

Is there a way out of this ?

Happy to pay for the time of a specialist in the area

 

Thanks

Replies (15)

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By David Ex
28th Mar 2024 15:05

The big thing I have learnt here in relation to VAT questions is the importance of establishing who is supplying what to who(m?). I don’t know whether that helps but a good place to start.

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By Paul Crowley
28th Mar 2024 15:07

Client charges VAT to the pub. Pub reclaims the VAT that it has been charged.
Client gets all the money as now the pub can reclaim the VAT it has paid to offset the the pub's prior output VAT

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By aj.adams
28th Mar 2024 16:59

Thanks for the answers. The problem appears to be persuading the pub that they can omit the food takings from their turnover. The client will account for the takings via his own company. Are they correct in having concerns over this ?

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Replying to aj.adams:
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By Bobbo
28th Mar 2024 17:11

Is there a written agreement setting out the status and responsibilities of each party for production and sale of food, faciliating of payments, provision of kitchen facilities?

If I visited this pub on a day your client was operating there would I (based on marketing, menu, receipt provided etc) feel like I was purchasing food from an independent caterer, rather than the pub itself?

If the answer to one or both of these questions is "no" then I would suggest their concerns are not unreasonable.

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Replying to Bobbo:
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By aj.adams
28th Mar 2024 18:19

There's no food served at all when the client isn't operating at the venue

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Replying to aj.adams:
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By David Ex
28th Mar 2024 18:55

aj.adams wrote:

There's no food served at all when the client isn't operating at the venue

Not sure that's relevant. The point is what happens when they are.

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Replying to David Ex:
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By Paul Crowley
28th Mar 2024 19:33

+1

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Replying to aj.adams:
RLI
By lionofludesch
28th Mar 2024 19:20

aj.adams wrote:

There's no food served at all when the client isn't operating at the venue

I'll go further than David.

I'm sure that's not relevant at all.

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Replying to lionofludesch:
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By David Ex
28th Mar 2024 19:26

lionofludesch wrote:

aj.adams wrote:

There's no food served at all when the client isn't operating at the venue

I'll go further than David.

I'm sure that's not relevant at all.

I'm just too nice.

Thanks (1)
RLI
By lionofludesch
28th Mar 2024 17:09

It's a classic "who is supplying what to whom" question.

Withholding 20% because of the VAT liability ? Surely a sixth ....

Are you sure that's what the 20% is for ?

The contracts need to be looked into - if they're oral, they probably need to be written.

But - as Paul suggested elsewhere - probably the easiest solution is customer pays pub £12, inc £2 VAT. Caterer bills pub for £12, inc £2 VAT - or less whatever commission they agree. If somebody gets food poisoning, who do they sue ? I suspect the pub because that's who they think they're contracting with - unless there's some small print on the menu.

Thanks (2)
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By David Ex
28th Mar 2024 19:04

aj.adams wrote:

The pub has been withholding 20% of food takings as they have to pay VAT on it.

Not 16.67%? They've been diddling your client then.

Thanks (1)
VAT
By Jason Croke
28th Mar 2024 20:43

Only one person is selling the meal at any one time.

Caterer is either selling direct to diner and pub is acting as agent in handling the payment (much like eBay handles payments between seller/buyer) or else caterer 'sells' meal to the pub and pub then onward sells it to the diner

Once you figure out which scenario then the answer re. VAT will present itself.

Sounds like pub thinks it is buying in the meal and onward selling it (hence collecting and declaring VAT) but cater client thinks they're selling direct to the punter and client isn't VAT registered so no need for VAT to be charged.

It's why stuff needs to be written down clearly so that nobody misunderstands the arrangement. No contract details = legal confusion and he said she said.

Should be fixable once you establish who is selling the burger and chips to the customer, it's either caterer or pub, so there aren't many permutations here.

Thanks (5)
Replying to Jason Croke:
the sea otter
By memyself-eye
30th Mar 2024 10:34

There are:
Burger and chips, cheese burger with chips (or fries) Veggie burger with chips and salad...
The list is endless!

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Replying to memyself-eye:
RLI
By lionofludesch
30th Mar 2024 11:17

[chuckle]

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Replying to memyself-eye:
Pile of Stones
By Beach Accountancy
03rd Apr 2024 21:31

You forgot spam!

That's everybody's earworm for the day...

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