Generally, cold takeaway food and drink is zero-rated (as long as it is not of a type that is always standard-rated, such as crisps, sweets and some beverages including bottled water).
Via VAT Act 1994 Schedule 8, Group 1, the sale of certain food is zero rated. However, there is an exception for supplies in the course of catering. Anything coming within the definition of catering reverts to the general rule and is taxable at the standard rate. The definition of catering includes “any supply of hot food for consumption off those premises…” Note 3 (b).
Historically, there has been many disputes over what food is “hot”. A seemingly straightforward definition one would think, but this is VAT, and case law insists that that is often not the case. A good example is the Eat case.
It may be coincidence, but I have dealt with a number of issues around this recently, so I thought it may be helpful to look at the VAT treatment of different types of food.
Pasties, sausage rolls, pies or other pastries
- If they are hot and straight from the oven: Although the pastry is hot, it is not being kept warm, so therefore there is no VAT
- Left to cool to room temperature: The pasty is not being kept warm, so no VAT is chargeable.
- Kept hot in a cabinet, on a hot plate or under a heat lamp: The pasty is being kept warm so VAT is due
Sandwiches
- Cold food is zero-rated for tax purposes so no VAT.
- Heated for a customer – standard rated per the Eat case.
Bread
- Freshly baked, cooling or cold – the bread is not kept warm, even though it may be straight from the oven, so would be VAT free.
Rotisserie chicken
- If hot from the spit; VAT on takeaway food intended to be served hot is VATable.
- Kept hot in a cabinet, on a hot plate or under a heat lamp – As the food is kept hot and served hot, VAT is applicable.
- Left to cool to room temperature – If the chicken is cooked then left to cool, such as in bags in a supermarket, it will be VAT free.
Takeaways
- such as fish and chips: VAT remains on all takeaway food served hot.
Catering
- All supplies of catering is subject to VAT regardless of what food and drink is being provided. This includes all restaurants and cafés: VAT applies if a supply of food and drink is made for consumption on the premises that it’s supplied in.
This is a general guide and, as case law shows, there will always be products on the “borderline”.
In summary, food that is hot can be treated as cold…