VAT on restaurant food: eat-in, takeaway and rates

How VAT applies to restaurant food

Food and non-alcoholic drinks that a restaurant, café or pub supplies for consumption on its premises carry VAT at the standard rate of 20%. ^[1] The rate on each sale then feeds into the business's VAT return, the work that VAT return services cover.

This guide deals with ordinary commercial restaurants, cafés and pubs. Catering in schools, universities, hospitals and student unions is covered by separate sections of VAT Notice 709/1 and is outside this guide.

Although the supply of most food and drink of a kind used for human consumption is zero-rated, there are exceptions: some items are always standard-rated, and other supplies are standard-rated because they are made in the course of catering. ^[2] Obvious examples of catering include supplies made in restaurants, cafés, canteens and similar establishments, except supplies of cold takeaway food.

The guide to input VAT and output VAT covers how the VAT for a period is worked out, and the guide to the VAT cash accounting scheme covers one way of timing it.

Eat-in sales and hot and cold takeaways

Restaurants must always charge VAT on everything eaten either on their premises or in communal areas designated for their customers to use, such as shared tables in a shopping centre or airport food courts. ^[3] For VAT on food, premises are the areas occupied by the food retailer, or any area set aside for its customers to eat in, whether or not customers of other food retailers may also use that area.

Takeaway food and drink is food and drink sold for consumption off the premises. Food that meets the definition of hot takeaway food in section 4.2 of VAT Notice 709/1 is a supply in the course of catering and is standard-rated, subject to the further provisions that section 1.3 of the notice refers to. The tests set out in section 4 include food or drink heated to enable it to be consumed hot, heated to order, kept hot after being heated, or provided in heat retentive packaging, and the notice gives the full detail.

Retail supplies of cold takeaway food are not supplies in the course of catering, and neither is food that customers must prepare themselves before it can be eaten.

Do cakes ordered as a takeaway carry VAT?

A cake bought cold to take away is a retail supply of cold takeaway food, so it is not a supply in the course of catering. Whether it carries VAT then depends on the product itself, because some items are always standard-rated and Food products (VAT Notice 701/14) explains which ones.

Grocery items sold from a catering outlet in the same form as when sold by a grocer or supermarket, and not intended for on-premises consumption, follow the rules in Food products (VAT Notice 701/14).

A cake eaten at a table in the restaurant is treated differently, because restaurants must always charge VAT on everything eaten on their premises. The same cake could therefore be treated one way when eaten in and another way when taken away cold.

Crisps, drinks and other standard-rated items

Food and drink for human consumption is usually zero-rated, but some items are always standard-rated, including confectionery, crisps and savoury snacks, alcoholic drinks, ice cream, sports drinks, and soft drinks and mineral water. These are the items a restaurant may need to check most carefully when it sells cold food to take away.

When the proprietor of a restaurant, café or other catering establishment supplies meals to themselves or their family, this is not regarded as catering and VAT need not be accounted for on those meals. Tax must still be accounted for on the full cost of standard-rated items, such as ice cream, sweets and chocolates, crisps, and soft and alcoholic drinks, taken out of business stock for own or family use.

The standard, reduced and zero rates

The standard VAT rate is 20%, the rate for most goods and services. ^[4] The reduced rate is 5%, used for some goods and services such as children's car seats and home energy. The zero rate is 0%, covering zero-rated goods and services such as most food and children's clothes.

A temporary reduced rate of VAT applies to certain supplies of children's meals from 25 June 2026 to 1 September 2026.

An earlier temporary reduced rate for hospitality applied at 5% from 15 July 2020 to 30 September 2021 and at 12.5% from 1 October 2021 to 31 March 2022. From 1 April 2022 the normal VAT rules apply, and VAT should be charged at the standard rate.

What items are exempt from VAT in the UK?

Some things are exempt from VAT, such as postage stamps, financial and property transactions. ^[4] The published rates list also shows betting and gaming, bingo and lottery ticket sales as exempt.

No VAT is charged on goods or services that are exempt from VAT or outside the scope of the UK VAT system. Exempt is not the same as zero-rated: exempt supplies are business supplies which do not meet the definition of taxable supplies, while zero-rated supplies are taxable supplies on which the current VAT rate is 0%. ^[5]

If all of a business's supplies are exempt, it will not be able to register for VAT. Restaurant meals are not in this position, since food served for eating in is standard-rated rather than exempt.