VAT on drinks consumed on premises

jd87

Can someone confirm for me, is VAT charged at standard rate on any kind of food or drink consumed on the premises?

I'm just wondering because I often get charged as take-away in a certain green branded coffee chain so I am assuming that they are doing this to evade tax.

Pennywise

It's not a matter of eat in or takeaway that determines VAT status. It's a matter of whether it's food or whether it's catering. Your coffee will be standard rated whether eaten in or taken away. As would your burger and chips from McD's. There's actually very little that will be zero rated if eaten in - I think that McD's managed to get a ruling that the milk they sell is zero rated if taken away, but standard rated if eaten in on the grounds that milk is a basic foodstuff. So, no, they probably aren't evading tax for a cup of coffee.

jd87

The receipt detailed whether there was any VAT and there wasn't. This was on cold coffee-based drinks.

jd87

Does anyone know? It can't be that much of a grey area surely?

Is VAT charged if on premises, and zero-rate if off premises, for a cold coffee based drink?

Owain_Moneysaver

It depends on how the cafe accounts for VAT.

There are schemes where they agree with HMRC that x% of their sales are zero-rated and they don't have to pay VAT on those sales, without having to separately itemise them on the till.

le_loup

jd87 wrote: »

Does anyone know? It can't be that much of a grey area surely?

You've obviously never been involved with VAT! Everything can be a grey area.
Is orange squash vat-able?
Is orange juice vat-able?
Is a Jaffa cake a biscuit?
Are salted peanuts food?
Is a dirty magazine a newspaper?

I won't go on.

JasonLVC

jd87 wrote: »

Does anyone know? It can't be that much of a grey area surely?

Is VAT charged if on premises, and zero-rate if off premises, for a cold coffee based drink?

Food/beverages and VAT is one of THE most complicated and litigious parts of the VAT legislation.

However, there are some geneal rules which Pennywise has already posted and with regard your particular query :-

Cold, milk based drinks which are taken off premises can be zero rated (so things like milk, milk shakes and what I presume is an Iced Cappuccino in your case).

http://www.hmrc.gov.uk/manuals/vfoodmanual/vfood7660.htm

So we can only assume the product you mention is 'predominantly' milk based (ie, more than 45% milk) and being served cold suggests it is not hot and therefore not deemed to be a hot beverage which is always standard rated.

So to answer your question, your coffee shop is not dodging taxes, it is simply exploting the legislation. If they can zero rate the drink then it means they keep all the money for themselves, whereas if it is a hot drink, they have to pay 20% of that money over to HMRC. Kerching.

I bet the iced based drink is just as (if not more) expensive as a normal hot drink, so you can guess where the most profit is being made;)

jd87

JasonLVC wrote: »

Cold, milk based drinks which are taken off premises can be zero rated

Thanks Jason, so if it is consumed ON premises then VAT is payable? Because the point here (which I fear I may not have made clear enough) is that they are pressing the take-away button on the till when I am actually sitting in.

JasonLVC

jd87 wrote: »

Thanks Jason, so if it is consumed ON premises then VAT is payable? Because the point here (which I fear I may not have made clear enough) is that they are pressing the take-away button on the till when I am actually sitting in.

Anything consumed on premises is deemed to be 'catering' and becuase catering is a service, not a supply of goods, it will be standard rated, whereas a milk shake taken away is not a service of catering, it is a supply of goods, which can be zero rated.

Simple hey!:p

If the staff are keying all orders as take away when the drink is consumed on premises then the staff have been poorly trained and the employer might be pulling a fast one.....

On saying that, HMRC have agreed methodologies for dealing with this sort of thing becuase someone could genuinely take away a drink, go outside and then change their mind and sit at a table outside for a drink/fag. That doesn't mean the shop was wrong, becuase they asked you and you said take away only to then sit down outside (sitting down outside the shop is still seen as eating on the premises where the tables clearly belong to that shop). I've bought a McD for takeaway and then decided to sit down if it starts to rain, etc.

So more recently, we see the big chains agree a percentage with HMRC up front on an annual basis, a percentage of eat in against taken away, factoring in outside tables and based on the sales made, so an average split is determined and the shop just goes with that split, but I'd still expect some accurate recordings at the tills becuase the review process of the split each year needs to be based on something and if the tills sales are out of kilter then the percentage split will be wrong over time as well.

Rest assured, HMRC watch these type of establishments very closely.

pelirocco

jd87 wrote: »

Can someone confirm for me, is VAT charged at standard rate on any kind of food or drink consumed on the premises?

I'm just wondering because I often get charged as take-away in a certain green branded coffee chain so I am assuming that they are doing this to evade tax.

They wouldnt be evading tax ,because if they havent collected it off you then there is nothing to pay to HMRC ,

antrobus

pelirocco wrote: »

They wouldnt be evading tax ,because if they havent collected it off you then there is nothing to pay to HMRC ,

That's a good one. Don't think that HMRC would actually buy it though. Any retail outlet that fails to charge its customers VAT when it should have done will get thumped for the VAT due if the matter comes to the notice of HMRC.