When is VAT charged?
Food and drink products sold by retailers (such as supermarkets) mostly have no VAT. But foods prepared by caterers, restaurants, cafés, bakeries, bars and takeaway businesses are subject to VAT in most cases.
HM Revenue & Customs’ requirements to add VAT specifically apply to ready-made catering and takeaway items (VAT Notice 709/1).
Takeaway is defined as ready-to-consume food and drink sold for eating or drinking off the company’s premises.
Catering is defined as the “supply of prepared food and drink” with a significant degree of service involved. This includes:
- Foods made in restaurants, bakeries, cafés, canteens and similar businesses
- Foods supplied for events and functions like weddings, conferences and parties
- Supply of prepared food or cooking at/for the customer’s home
- Delivery of cooked ready-to-eat meals or foods
If your food and drink is provided in the course of catering (as defined above), it will likely incur VAT.
Cold takeaway food, retail supplies of groceries, and foods requiring further preparation by the customer are not considered catering.