Choose the correct VAT rate from the menu

How to apply the 5% VAT rate applicable for the hospitality sector On 15 July the Government announced a cut in the VAT rate to 5% for the hospitality sector in an attempt to kick-start the industry but with VAT on catering sales complicated at the best of times, we have to be even more accurate with our record keeping now that a new rate has been introduced

The new rate and how and when to apply it are best explained by way of a couple of examples.

Rachel’s takeaway lunch
Rachel goes into a licenced cafe on 23 July and buys a takeaway snack comprising a ham salad sandwich, a bottle of lager and a cappuccino. She asks for a VAT receipt as she is away on business and wants to claim the input VAT back on the purchase. How does the cafe owner account for VAT on Rachel’s purchases?

The ham salad sandwich is zero rated being cold takeaway food; the cappuccino is subject to the temporary new 5% rate and the bottle of lager is still subject to 20% VAT rate being an alcoholic drink.

The cafe owner reckons he needs to get a better till!

Sue’s evening meal
Sue goes into a pub on 15 July for her evening meal whist working away in Scarborough. She purchases a tuna sandwich, a glass of wine, a fish and chip supper, a packet of crisps and a latte. All of her purchases attract the new 5% VAT rate except the glass of wine as they qualify as food served on the premises of the pub.

Sue’s lunchtime takeaway meal
The following lunchtime, Sue purchases exactly the same meal from a takeaway cafe only this time she suffers a different VAT charge.

The crisps are subject to a 20% VAT rate as they are classified as ‘confectionary’ and the sandwich is zero rated being cold takeaway food.

Complicated I hear you say!

It is to be hoped that the new temporary VAT rate which applies to sales between 15 July 2020 and 12 January 2021 will give a boost for the sector but it will undoubtably cause business owners and their accountants a headache in making sure that their VAT returns are correct

If you don’t want to fall foul of the VATman why not get your returns checked by us to ensure that they are correct. We can give you a fixed upfront quote to carry out this check and you can email us on

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