Starting a café or restaurant can be an exciting venture, but navigating VAT (Value Added Tax) registration can be overwhelming. This guide demystifies how VAT works for your food business, helping you understand when and how to apply it to your delicious offerings.
What is VAT? VAT is a consumption tax that applies to most goods and services sold by VAT-registered businesses. Knowing the VAT implications for your café or restaurant is crucial for compliance and pricing.
Who Needs to Register for VAT? You must register for VAT if:
- Your taxable turnover exceeds £90,000 in any 12-month period.
- You expect to exceed this threshold within the next month.
- You’re based outside the UK but supply goods or services to UK customers.
Voluntary VAT registration is also an option, which can aid businesses anticipating growth and looking to reclaim VAT on eligible purchases.
How VAT Works for Cafes and Restaurants VAT rates vary depending on the service. The two main categories are:
- Standard Rate (20%): Charged for food consumed on-premises, including cakes, plain biscuits, and cold sandwiches.
- Zero-Rated (0%): Applicable to take-away items like cold sandwiches and pastries, provided they don’t meet the criteria for hot food.
Takeaway Services and VAT Takeaway food can involve various VAT implications:
- Hot Food: If intended to be eaten hot or exceeds room temperature, the standard VAT rate applies.
- Cold Food: Generally zero-rated, exceptions include ice cream, chocolates, and fruit juices, which have a standard rate.
Responsibilities of a VAT-Registered Business If your business is VAT registered, remember to:
- Charge and record the correct VAT amount.
- Maintain thorough records of the VAT you pay and collect.
- File VAT returns with HMRC, typically every three months, and remit any owed amounts.
Navigating VAT can seem complex, but consulting with an accountant can simplify the process and ensure compliance. Understanding the nuances of VAT helps you better manage your café or restaurant’s finances while providing clarity on pricing your delectable offerings.
This can be complex, so do speak to your accountant if you’re struggling, or enquire with us!
Need help with VAT? Give us a call on 020 8911 8111 or get an instant online quote.