Understanding VAT for Cafes, Restaurants, and Takeaways

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.

How to reduce your Capital Gains Tax Liability

The amount of CGT paid has tripled since the same period a decade earlier. Below, we’ve outlined some ways to reduce the tax liability on capital gains. What does CGT apply to exactly?

Calculating capital gains tax liability


As an example, you’ll pay CGT on any profits you make when you sell shares, a second home and some personal possessions you sell for more £6,000. As an individual any profits over £12,300 (as that’s the current CGT exemption) are chargeable. CGT liability is paid as a percentage, and the amount you pay will depend on which tax bracket you fall into. For example, the rate for higher and additional rate taxpayers is 28 per cent on property and 20 per cent on other assets. For basic rate payers, it’s 18 per cent and 10 per cent respectively.

How to be more CGT efficient.


Open up an ISA

You can invest up to £20,000 a year in an ISA without having to worry about capital gains tax liability. That sum doubles for those who are married or in a civil partnership since it’s possible to combine allowances.

Transfer assets

By transferring assets to your spouse or civil partner in a lower tax bracket, you can reduce your CGT liability. Alternatively, you can make use of their allowance, meaning – you could potentially save up to £24,600 this way without having to worry about paying CGT.

Carry forward losses

Provided you record a loss in your tax return for a particular year, you can carry it forward to the next year and offset it against any profits made from the sale of assets.

Spread sale over assets

By selling half your assets one year and the other half the following, you can benefit from the tax-free allowance for each separate year – meaning you’ll double the CGT liability allowance.

Pay more into a pension

Putting money into a pension means you’re deducting it from your overall earnings, so it could help keep you in a lower tax band, meaning you would be able to keep your CGT rate at 10 per cent for non-residential assets.

Open up an EIS

You won’t pay CGT on any gains made in an Enterprise Investment Scheme (EIS), provided you have held the account for at least three years.

Give shares to charity

Shares, property or land which is handed over to charity are eligible for CGT liability relief.

Hold on to your assets

Any capital gains tax liability is wiped out after your death. That’s because inheritance tax takes over at this point. Yes, you won’t benefit from the savings, but at least your family won’t miss out since there won’t have been CGT and Inheritance Tax paid on the same assets.

Consider what you invest in

Any gains made on antiques and collectables can be tax-free. That’s because assets expected to have a life of 50 years or less are considered ‘wasting assets.’ This category includes old clocks, caravans, leisure boats and vintage cars. Crucially though, paintings and jewellery aren’t considered ‘wasting assets’, so any profit over £6,000 will usually be subject to CGT.

Get in touch


To find out how we can help you reduce tax liability on capital gains – or assist with other accountancy matters, please get in touch with the team here at Karbhari & Co Chartered Accountants and Registered Auditors. Call us on 020 8911 811 or email info@karbhariandco.com. See our website at www.karbhariandco.com

Don’t delay in submitting and paying self-assessment tax

Whilst HMRC has announced that it is waiving late filing and late payment penalties on self-assessment tax returns for one month, those required to submit a self-assessment tax return are being urged not to use this as an excuse to delay.

Of the 12 million tax payers required to submit a tax return by 31st January, only around half had done so by 6th January, leading HMRC to issue the extension to the traditional end of January deadline.

However, in announcing the waiving of penalties until the end of February, effectively giving tax payers an extra month to submit and pay, HMRC also encouraged individuals to submit and pay on time if they can. Whilst penalties are being waived for this brief period, interest will continue to be calculated from 1st February, so if you can submit and settle before the traditional deadline it is prudent to do so.

Covid still having an impact

Aware that covid is still causing issues for individuals and their agents/accountants, HMRC hoped the extra time would give people the opportunity to meet their obligations without worrying about receiving a penalty.

The deadline to file and pay remains 31 January 2022. The penalty waivers will mean that:

  • anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty, as long as they file online by 28 February
  • anyone who cannot pay their Self-Assessment tax by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April 2022.

The existing Time to Pay service allows any individual or business who needs it the option to spread their tax payments over time. Self-Assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return.