Share this content
36

VAT or NO VAT?

Didn't find your answer?

Search AccountingWEB

During the 11 years experience I assisted and managed the Accounts for many take away businesses in London and surrounding areas around. I also played a prominent role in handling VAT Investigations on various occasions. 

We all know that one of the main problems of the Take Away Industry is the VAT on sales. For this reason, on 25 September 2013, more that 15,000 catering businesses in the UK protested, asking to the Government to reduce their VAT rate by 5%. 

The Government answered as follow : "We do not accept the industry's case for a VAT rate cut for restaurants and catering," (Treasury spokesperson)

It is very easy to reach the VAT compulsory registration threshold as a take away business and many small business owners have the following question: "From the moment I'm VAT Registered means I have to increase the prices by 20% or I will lose 20% of the sales if I consider sales vat inclusive?"

The answer is: It 'DEPENDS' on the following 3 variables:

1. Is the food itself considered at zero or standard rated ?

2. Is it hot or cold ?

3. eat in or take away ?

After dealing with many VAT situations and investigations and after countless years of applying the Notice 701/14 Food i can give you a few examples to make help you understand the concept and to combine the 3 variables mentioned above:

1. Wrap

Many of us use to buy take away wraps and buritors and you probably now have the following question "did i pay the right price or was I charged more"? 

Based on Notice 701/14 Food, if you eat seated in the shop or as a take away outside of the shop, the wrap will be sold with 20% vat rate because variable 2 applies which says that hot food is sold at 20% rate.

2. Sushi

Sushi and other uncooked meat is raw food, so in principle it's 0% VAT.

Therefore if you take it away you will be charged 0% vat in your bill, but if you sit and eat it in the shop the variable 3 automatically  kicks in, which says that any food consumed at the place where it's been served, wherever if is cold or hot will have to have the standard vat rate.

3. Ice-cream & Frozen Yogurt

Ice cream and frozen yogurt are goods which are considered standard rate, therefore variable 1 applies.

Even if you buy the ice-cream and the frozen yogurt from the take away shop and you will eat while you enjoy your time in the park, you still have to pay the price with 20% vat rate.  

4. General rule

- Deciding where to always apply 20% or 0% VAT depends on the type of food sold. 

- Any food which is cooked and hot has 20% VAT on it. If it is cold then the other variables has to be considered

- If you eat in then 20% vat will be charged. But if you take away then the other variables has to be considered

Conclusion

As long as one variable kick in and makes the food taxable at 20% then automatically the food will be sold at standard rate.  

Most take away and catering businesses do not receive accurate and detailed advice on how to apply VAT on their sales and that has an impact on their businesses and on the final customers too. As soon as they get VAT Registered they think they have to increase the ALL prices by 20% or they have to consider sales prices 20% VAT inclusive.

Those mistakes and negligence impact the business itself and the final customer; businesses will pay too much VAT to HMRC on sales which didn't have to contain the 20% VAT and customers will pay a higher price for the food which shouldn't cost them that much.

Having an Accountant which take care of your business properly can make a difference. 

Replies (36)

Please login or register to join the discussion.

By Ruddles
11th Mar 2018 21:21

Very interesting, I’m sure, but what’s your question?

Thanks (4)
Replying to Ruddles:
avatar
By Anca Alexandra
11th Mar 2018 21:51

It is not a real Q actually, it's more like an interesting subject to talk about.

Thanks (0)
Replying to Anca Alexandra:
By Ruddles
11th Mar 2018 22:11

This particular area of the site is, or so I thought, for asking questions and receiving answers. “Any Answers”, “Ask your question”

Content such as yours belongs in a blog post.

Thanks (2)
By Ruddles
11th Mar 2018 21:25

“Having an Accountant which [can] take care of your business properly can make a difference”

I agree - but make sure that you engage one that understands basic tax legislation.

Thanks (4)
avatar
By Matrix
11th Mar 2018 21:45

Prices should be set at the outset as VAT inclusive so prices do not have to be raised on registration and included in any business plan. Market forces dictate the price.

It may be beneficial to use the flat rate scheme.

Thanks (1)
Replying to Matrix:
avatar
By Anca Alexandra
12th Mar 2018 18:32

Did it ever happened to you to be asked “eat in or take away?” And if you say take away then you pay less? Well...in London it happens every day.
My whole point is to make you aware of the fact that you should be charged correctly when you take away or wat in.
And if you are aware you can easily notice than most of food business does not apply the rules I mentioned.
Also business itself need to be correctly advices by their accountants in order to charge clients correctly.
That was my whole point.

Thanks (1)
Replying to Anca Alexandra:
RLI
By lionofludesch
12th Mar 2018 21:11

Anca Alexandra wrote:

Did it ever happened to you to be asked “eat in or take away?” And if you say take away then you pay less? Well...in London it happens every day.

London is well known for fleecing customers.

What I find odd is, you go into a takeaway that only does hot food and they ask whether it's eat in or takeaway.

If someone asked me that about cold food, I'd ask whether it was cheaper if I took it away. If no, I'd say, "eat in".

Thanks (0)
avatar
By NH
12th Mar 2018 07:03

I am struggling to see why you would post this in a section that is meant for questions and answers, not sure what the purpose of your post is really.
Anyway, regarding the reduction in VAT for restaurants you only have to see what happened in France to see this would never work. Sarkozy introduced a reduced rate to encourage more people to eat out, in reality the restaurants kept the retail prices the same and pocketed the extra profits so a couple of years later the decision was reversed, mais oui quelle horreur, imagine that, a reduction in tax being taken advantage of to make more money.

Thanks (1)
Replying to NH:
avatar
By Anca Alexandra
12th Mar 2018 18:32

Reducing tax was definitely not my point.
Did it ever happened to you to be asked “eat in or take away?” And if you say take away then you pay less? Well...in London it happens every day.
My whole point is to make you aware of the fact that you should be charged correctly when you take away or wat in.
And if you are aware you can easily notice than most of food business does not apply the rules I mentioned.
Also business itself need to be correctly advices by their accountants in order to charge clients correctly.
That was my whole point.

Thanks (0)
By northernmonkey
12th Mar 2018 11:03

Well that's ten minutes of my life I'll never get back!

Thanks (7)
PJ
By paulgrca.net
12th Mar 2018 13:04

You could not make this up could you!
''Thanks for telling all the accountants on accounting web that having an accountant can make a difference!''

Thanks (4)
Replying to paulgrca.net:
avatar
By Anca Alexandra
12th Mar 2018 18:33

Having a good accountant makes difference

Thanks (0)
Replying to Anca Alexandra:
By Ruddles
12th Mar 2018 18:39

Anca Alexandra wrote:

Having a good accountant makes difference


So does being able to present one’s case in a coherent fashion.
Thanks (4)
avatar
By vinylnobbynobbs
12th Mar 2018 16:04

Look her up she is marketing

Thanks (0)
Replying to vinylnobbynobbs:
avatar
By Anca Alexandra
12th Mar 2018 18:34

Hahahahaha
Far away from my point.

Thanks (0)
Replying to vinylnobbynobbs:
avatar
By Anca Alexandra
12th Mar 2018 18:35

Wow I see that you actually read things though do you?
People per hour had been created years back as Bookkeeping services.
My position now after years and years is practice manager.
And you came up to say that u marketing? Lol
Nice one.

Thanks (0)
avatar
By Anca Alexandra
12th Mar 2018 18:47

Make your life easy guys.

If you don’t like it or if you are against the point I brought up you don’t have to comment it. Feel free not to. No one point the gun to you.

Having another professional opinion on this matter i thought that is always helpful.

Probably if I would have end up the article by writing “what do you think about” then you could have link to the fact that an opinion is always welcome.

But if that magical Q is not there then you can’t get than a normal conversation and Exchnage of opinions can be always welcome.

Impressive... have a nice evening.

Thanks (1)
avatar
By Cheshire
12th Mar 2018 18:52

The point is - you are trying to teach people on here how to suck eggs, but not doing it very well.

Do you honestly think you can teach fully qualified Accountants about VAT regulations for food outlets in a few badly worded paragraphs?

Know your audience.

Know your subject before writing a blog about it.

Thanks (1)
Replying to Cheshire:
avatar
By Anca Alexandra
12th Mar 2018 19:13

Hahahahaha
Teaching???

Sharing a knowledge for you means teaching??
For me means sharing!!

Plus, I m sure not all members knows about Vat as much as you do due to different level of knowledge and experience so useful article should always be welcome rather than attacking them.

If you consider the article wrong then advice, let’s discuss and let’s grow.

Yes I m aware about the audience: other accountants. What’s wrong in sharing info with other accountants?

Sharing, talking and discussing it’s a way or growing!

Attacking definitely it’s not the best way to go.

Thanks (1)
Replying to Anca Alexandra:
By Ruddles
12th Mar 2018 19:40

There are two issues:

Quite apart from the appalling grammar, your post - already pointed out - belongs in the blog section.

Secondly, you’ve already demonstrated a lack of understanding of basic tax legislation - which rather devalues anything else you might have to say.

Thanks (1)
Replying to Ruddles:
avatar
By Anca Alexandra
12th Mar 2018 20:19

Too late to discuss issues. You already burned your ground.

You attacked me, then I point out to you that what you do is mean and how you try to be constructive and point out issues??

Come on! Leave it.
Have a nice evening

Thanks (1)
Replying to Anca Alexandra:
avatar
By SpreadsheetUser
13th Mar 2018 07:17

Unfortunately you’ve picked the wrong website to come onto and expect other people to be civil.

Thanks (3)
Replying to SpreadsheetUser:
avatar
By Anca Alexandra
13th Mar 2018 07:46

I agree with you. And is sad to see professional people behaving this way.

Thanks (0)
Replying to Anca Alexandra:
RLI
By lionofludesch
13th Mar 2018 08:01

Most -if not all -of the regulars on this site will already be aware of the issues you raise in your OP. By assuming that you need to convey this to them, you show a lack of respect and thus take the risk that site members will not give you the respect that you expect.

Thanks (0)
Replying to lionofludesch:
avatar
By Anca Alexandra
13th Mar 2018 08:44

Maybe not taking things too personal would be a good thing to do.

When someone say or write about something which you (or others) know already, it doesn’t mean disrespect to you or to other people.

If I say “today outside it’s sunny” and obviously you already know it, that means I offended you? Clearly no!

We are living in a free country where we are free to express our own thoughts. And so I did.

Saying and sharing things around seems it’s a crime : people get agrevise, people get sensitive and offended by a simple article. It makes me laugh seeing all this.

I personally see these reactions as a nonsense.

I didn’t intend to offend anyone. I didn’t have any of those ideas that I read above. I just wanted to share a point and to see constructive comments.

But all I saw was everything apart from constructive and professional comments.

Again, it’s sad to see this kind of reactions from professional people.

Thanks (0)
Replying to Anca Alexandra:
avatar
By atleastisoundknowledgable...
13th Mar 2018 08:51

“If I say “today outside it’s sunny”...”

I would say “I think you mean “it is sunny outside today”, or “today, it is sunny outside””.

Thanks (0)
Replying to Anca Alexandra:
Stepurhan
By stepurhan
13th Mar 2018 09:11

Anca Alexandra wrote:

We are living in a free country where we are free to express our own thoughts. And so I did.


So did those responding. That's the thing about free speech. It includes criticising others.

Your analogy is flawed. It's you just tell someone it's sunny outside, that is not offensive. If you tell someone it's sunny outside, when you're both standing out in that sunshine, and do it in a way that indicates you think they wouldn't have noticed otherwise, that is offensive. That is what you are doing here.

But the key point you are missing is that this is "Any Answers", a place for asking questions. This is not a question, and there is a blog section where these things belong. If you went into a library and started playing rock songs, would that be you exercising your rights in a free country, or just being inconsiderate of others?

You want respect. Earn it by actually thinking about what you are doing before doing it. Posting something like this in completely the wrong place, then complaining when people call you out on it is precisely the opposite of earning respect.

Thanks (1)
Replying to Anca Alexandra:
avatar
By atleastisoundknowledgable...
13th Mar 2018 09:01

“If you consider the article wrong then advice, let’s discuss and let’s grow.”

So we agree that it’s an article not a question and should therefore by definition not be in the question section of the website.

Thanks (0)
avatar
By NH
13th Mar 2018 08:11

Plus we still have no question asked in the Any Answers section!

Thanks (0)
By Tim Vane
13th Mar 2018 08:51

Since the OP has neglected to ask a question, and since this is a forum for questions, let me sort this thread by asking one now.

Would you trust the OP to take care of your business properly?

Thanks (2)
Replying to Tim Vane:
avatar
By atleastisoundknowledgable...
13th Mar 2018 09:03

Depends.
Can’t think what it depends upon - can anyone help me out?

Thanks (0)
Replying to atleastisoundknowledgable...:
avatar
By Paul Hawes
13th Mar 2018 09:38

8060

Thanks (1)
avatar
By Cheshire
13th Mar 2018 09:18

The only person I see getting sensitive and upset is the OP. Understandable in some respects as no-one likes to be criticised, but in yet another attempt to be constructive, as others have in their own inimitable style, you have to admit that the whole post was ill conceived in the first place, for a number of reasons.

It is at the ABC end of the subject matter, which is not right for a forum of this nature, would've been better placed (not in the questions section), would have fared better with a spell check, but would have fared even better with the benefit of some technical input. Not the HMRC guidance rubbish, but legislation and case law.

Anca, the way you have posted it makes you sound as if you are claiming to be an authority on the subject matter, but from the content that clearly isn't the case. Your post is written more as if it should be aimed at business owners or the level 1 student (ignoring inaccuracies).

You accuse people of being aggressive and attacking you, when all they are doing is commenting on your article, which they have a right to do under the same freedom of speech you mention. Bruised ego I'm sure, but you need to toughen up, we've all had it!

It is ok to share knowledge, but be careful that what you share is correct, or be prepared to accept a barrage of complaints from the old guard on here when it isn't. I guarantee you will learn more than you can teach them! I think I can safely say that you learnt something from your other post for starters.

Thanks (1)
Replying to Cheshire:
Quack
By Constantly Confused
13th Mar 2018 10:29

Cheshire wrote:

The only person I see getting sensitive and upset is the OP.

And Ruddles. Could someone go check on Ruddles, I'm concerned how hard they are taking this discussion...

Also this makes a refreshing change, usually it's "This websit iz onli 4 accountants not 4 the publik how dare u come her wiv ur laymen kwestions", are we switching to "How dare you come here and try and teach us things we might not know!"

My VAT knowledge is pretty low key, I've barely any experience in it, yet I still find I know considerably more than some accountants who have been in practice nearly as long as I've been alive (mainly because I find it all so fascinating). So I'm all for the profession being taught to suck eggs.

Thanks (2)
Replying to Constantly Confused:
avatar
By andy.partridge
13th Mar 2018 10:32

I'm with you on this.

Thanks (0)
Share this content