Sorting out VAT on food sales
All café and take-away owners need to be clear about the VAT treatment of the food they sell; whether each item should be zero-rated or standard rated (20% VAT). Zero-rating only applies to sales of cold take-away food such as sandwiches and cakes, although there are exceptions: fizzy drinks, bottled water, ice creams, crisps and chocolates are standard rated as confectionery.
Any mistakes made in recording the VAT category will result in an incorrect VAT return.
HMRC will review the proportion of zero and standard rated sales reported on VAT returns, and they may carry out an unannounced observation if the zero-rated sales appear too high. Where the observed sales are not in line with the VAT return the HMRC officer will issue a VAT assessment and possibly a penalty.
To avoid such difficulties, keep all your till rolls and z-readings as evidence to support the declared split between the two rates of VAT. Train your staff in correct till procedures and make sure they understand which products are zero or standard rated. Consider investing in a computerised till that has a button for each product, and which automatically calculates the VAT due on that product.
We can also help review your sales each quarter to see if the figures are consistent from period to period, and investigate any variations.