There is VAT on food, but understanding the rules is not as straightforward as you might think. For example, some foods are VAT applicable, while some aren’t.
Understanding how VAT on food applies and how it works is vital for retailers, manufacturers, food producers, and restaurant owners to understand.
This article outlines the rules clearly, what foods are standard rate VAT applicable, and those that are zero-rated.
Sales relating to catering are subject to value-added tax (VAT). VAT on food and drink includes any catering for weddings, packed lunches, and delivery of ready-to-eat meals.
Any meals that require more preparation, such as reheating, are not classed as catering sales. If your food product is consumed on your premises, then you must charge VAT. It’s worth being aware that your premises include shared tables within a shopping centre or tables and chairs inside or outside of your restaurant.
If you sell hot takeaway food, then you may need to charge VAT. You must charge VAT on your food sales if you meet one of the five criteria.
Any food and drink served hot that meets any of the five criteria would be subject to VAT.
Make sure to add any reheating instructions to your takeaway food, and don’t sell any meals in containers lined with foil. You must also allow any hot food products to cool down naturally. Finally, it’s worth noting that you can keep food products at a specific minimum temperature if required for hygiene purposes.
If you’re a VAT-registered business, you probably want to find out if it applies to any food items. The answer is that it depends. We aim to inform you of the VAT rules regarding food supply, home consumption foods, and general food products.
Your sales are most likely eligible for a VAT zero-rating if you sell cold takeaway food. Also, if you don’t meet any of the five conditions that constitute ‘hot food’, your sales are probably zero-rated, as they could be cold takeaway food.
Below we outline some food products that HMRC have specifically given a standard rating:
Below are some food items that HMRC have specifically awarded a zero rating:
A zero rate applies to all foodstuffs such as raw meat and fish, fruit and vegetables, nuts, pulses and cereals, and culinary herbs. You can supply the previous unprocessed foodstuffs direct to the public, or they can be used as ingredients as part of the manufacturing process, for example, in the below VAT notes, meat and poultry, exotic meats, horses, and more.
|Butchered or complete carcass meat and poultry (Chicken, Beef, Pork, Lamb etc.)
|Butchered or complete carcass exotic meat (Horse Crocodile, Ostrich, Kangaroo etc.)
|Live animals that are generally for human consumption in the UK
|Animal products for medicinal purposes
|Live horses (not recognized as a food species)
|Human consumption fish
|Human consumption ‘ornamental’ fish (e.g. Koi carp)
|Human consumption live fish
|Fish classified as ‘ornamental’ not prepared for human consumption (e.g. Koi carp)
|Fish for bait & not for human consumption
|Fit for human consumption vegetables and Fruit
|Fruit and vegetable pulps and purees used for cooking
|Fruit and vegetable smoothies
|Juice including juice from concentrate
|Culinary herbs and spices for cooking
|Raw and unprocessed nuts and pulses
|Shelled and roasted or salted nuts
As you can see from the table, unprocessed foodstuffs are usually zero-rated.
Zero-rated VAT applies to foods and ingredients that are sold for home cooking and baking purposes. Sweeteners, including natural foods such as honey, molasses and sugar, and artificial products such as sucralose are zero-rated. Prepared mixes, sauces, soups, and cakes used as ingredients at home are zero-rated. Ingredients that are not a food product, such as glutamate and baking powder, use zero rates.
Any mixes for frozen products such as ice cream, ice cream cakes and ice lollies are charged at the standard rate.
It’s always the standard rate food supplied in catering, which includes hot take-away food and drinks.
Most food that is for human consumption is zero-rated. There are a few exceptions to this rule, such as ice cream, which is the standard rate, but frozen yoghurt has a zero rating if it needs to thaw before being consumed.
Beverages such as alcoholic drinks and soft drinks are standard-rated, but milk-based drinks, teas, and coffees are zero-rated drinks. Crisps and other seasoned and salted snacks are subject to standard rate VAT.
The standard VAT rate applies to any biscuits covered or partly covered in chocolate. Interestingly enough, any biscuits that are even similar in appearance or taste to chocolate are subject to VAT.
There are a few exceptions where biscuits are not subject to VAT. Biscuits with chocolate chips within or pressed into the dough before cooking are zero-rated. Bourbons and other similar ‘chocolatey’ biscuits that have a filling in between two layers/halves are not subject to VAT. Jaffa cakes and caramel biscuits are also eligible for a zero rating.
The standard rate food supplied VAT applies to any biscuits, ice cream wafers, or shortbread treats that are either completely covered or partly covered in chocolate. This includes biscuits that have been decorated with chocolate or a topping/coating that resembles chocolate.
Gingerbread men totally or partly covered in chocolate are subject to the standard VAT rate, with no more than a couple of chocolate drop eyes being permitted to achieve a zero rating. Anything more would mean he is subject to standard rate VAT.
Hot take-away food and drink are subject to VAT, and bakery products such as pies and pasties, and particularly bread. But it all depends on how the food is prepared and served and if it is kept hot. Read our section about what constitutes ‘hot food’ according to HMRC in our section ‘How to clarify that your food requires further preparation or is not served hot’.
Sweetened prepared food and drink, known as confectionary, include candies, chocolates, and sweets, and food is normally eaten using fingers. Regarding any VAT on confectionary, there are some cases of zero-rated confectionary food items and standard-rated confectionary.
Cakes and edible cake decorations, pastries and baked goods such as flapjacks, eclairs and meringues are all zero-rated. On the other hand, chocolate has the standard rated VAT on food. The exception is similar sweets, chocolate spread, small chocolate buttons, liquid chocolate icing, chocolate body paint, sweets and chips that are sold for culinary purposes.
Marshmallows, candy floss, lollies, sweets, chewing gum, bubble gum, Turkish delights, and fondant have the standard rate of VAT on food applied.
Prepared dried fruit confectionery sold for snacking and retail packs specifically for home baking, and snacking traditional Indian and Pakistani products like halvas, laddoos, and barfis are zero-rated. Still, it’s worth noting that fruity chocolate, compressed fruit bars, and other fruit snacks that are sweet to the taste are charged the standard rate of VAT.
Sweetened popcorn, fruits or nuts with chocolate, or sugary coating charges standard VAT. Remaining on the topic of fruit, crystallised, chocolate-covered ginger or sugar ginger preserved is charged VAT due to sweet-tasting dried fruit.
Sugary seed bars, cereal bar products, and any fruit-based sweetened prepared food sold as confectionary are charged VAT notes; prepared cake bars are zero-rated. On the other hand, fruit confectionary that is sweet to the taste, chocolate cups, and toffee apples, for example, are standard rated.
Suppose the biscuits are chocolatey in nature (covered in chocolate or resemble the taste and appearance of chocolate). In that case, they are susceptible to the standard rate of VAT on food items.
Chocolate chip biscuits are zero-rated when the chips are kneaded into the dough before cooking/baking, as they are not classified as partly coated biscuits. Interestingly, bourbons, custard creams, and other ‘sandwich-style’ biscuits are zero-rated, despite being chocolatey.
Jaffa cakes are zero-rated, and similar confectionery biscuits coated with icing or caramel that does not taste like chocolate, or look like it, are also zero-rated.
Any biscuits that are decorated, partially or entirely covered with outer surface chocolate (or similar) charge VAT at the standard rate. This includes shortbreads, gingerbread men, biscuity foods with a chocolatey appearance, ice cream wafers with chocolate or similar.
Any products that have been produced to be eaten while frozen, such as ice cream, must be standard VAT rated. Any frozen food items that require cooking or thawing before eating are zero-rated.
Some examples of zero-rated products include mousse, baked Alaska, chocolate-free cones and wafers, frozen yoghurt that needs to be thawed before consumption, toppings, trade and fruit syrups, and sauces not sold with ice cream.
Standard-rated frozen products include, but are not limited to, ice cream and lollies, arctic rolls, ice cream cakes and gateaux, sorbets, granitas and frozen yoghurt that is designed to be consumed frozen. Most food that is meant to be eaten frozen is standard-rated.
Any mixes or powders for creating ice cream products and cones or wafers sold with ice cream are also subject to the standard rate of VAT on food. Zero-rate ice cream options are to produce a frozen yoghurt product that must thaw before consumption.
All supplied alcoholic drinks must have the standard rate of VAT applied. This includes wine, spirits and liqueurs, cider, shandy, beer and perry, and semi-set alcoholic jellies.
On the other hand, alcohol-preserved fruit and desert jellies are zero-rated and rum babas. Normal food liability rules apply, so any liqueur chocolates are subject to standard rate VAT.
Most cold drinks, including smoothies, juices, and non-alcoholic drinks, are standard rated. Zero-rated drinks sold are cold coffee, milkshakes, and cold tea.
Some non-alcoholic beverages are zero-rated, such as milk and milkshakes. However, flavourings that are not cocoa or coffee extracts are standard-rated. Herbal and breakfast teas and maté are zero-rated, but laxative or purgative ‘teas’ like senna are standard-rated. Coffee and coffee alternatives such as chicory are zero-rated.
Water on sale as a beverage, including spa, mineral, and table waters, are standard-rated, as well as alcohol-free wine and beer.
Fizzy soft drinks like tonic, cola, and lemonade are zero-rated, as er squashes and fruit cordials. However, it’s worth being aware that flavourings, powders, and syrups that go into making any standard-rated beverage are standard-rated, too.
Milk alternative drinks such as soy, ride, and coconut milk is zero-rated. Other drinks not classed as beverages, such as meal replacement drinks, are also zero-rated.
The standard VAT rate applies to home brew beer and winemaking kits, as well as special wines and brewers’ yeast products, hopped malt extract, roasted barley, malted barley, and hops.
Related to winemaking, grape concentrates, foods for winemaking at home, including sweet tasting dried fruit like elderberries and sloes for country winemaking.
Any food product you sell at a general or retail outlet that is for home brewing or winemaking must also have the standard rate of VAT on food applied. Such products include dried canned or fresh fruit, fruit juices including fruit juice from concentrate, plant malt extract, barley and glucose.
Candied peel, alcoholic beverages, drained cherries, cocktail or maraschino cherries are zero-rated in the case of being used for home baking.
Any products that have been labelled or advertised specifically for home winemaking and brewing or have instructions or recipes for making wine or beer must also have standard rate VAT applied.
The standard VAT rate applies to various savoury snacks, such as potato crisps, snacks produced by the swelling or puffing of cereals like popcorn, flavoured rice cakes, and roasted & salted nuts.
It’s worth noting that the standard VAT rate only applies to the potato and cereal products that are packaged and ready to consume with no further preparation required by the customer or breakfast cereal products coated with chocolate. The products must be pre-packed for sale in a carton, sealed bag, or container to be labelled as packaged.
However, even when sold loose, roasted or salted nuts have the standard rate of VAT on food applied. Any roasted or salted nuts that are still in their shells (pistachios), or toasted almonds for sale in packaging are zero-rated.
Zero-rated savoury snacks include those made from roasted or sliced and dried human consumption vegetables, not including potatoes. For example, prawn crackers, tortilla chips, bagel crisps, corn chips, and roasted legumes and pulses are all zero-rated.
With takeaway businesses growing due to the Covid pandemic, many businesses are seeking to understand how VAT applies to take-away food and drink.
The VAT rules concerning takeaways are fairly straightforward, and the standard rate of VAT on food and drink applies if:
A zero-rating is applied if the:
Sushi consists of seaweed wraps, cold rice, and raw fish; it is zero-rated, assuming the food is taken away.
Sushi bars and restaurants are also known to serve hot food, like Katsu curries, fried and battered products, and more that are standard-rated.
Sellers must charge VAT at a standard rate on any food and drink that is eaten or consumed in a designated seating area or the suppliers’ premises. This applies to restaurants, bars, cafes, retail sale outlets, supermarkets, as well as sports venues, cinemas, and theatres that cost to enter.
Anything produced ‘in the course of catering’ is always charged the standard rate of VAT. This statement is defined as the supply of food and drink that involves a significant amount of preparation or service. This includes, but is not limited to:
Groceries, food and drink that require a customer to prepare, and cold takeaway food are not in the course of catering, so they are zero-rated.
For more information about the course of catering, our specialized team of VAT-savvy accountants would be happy to help.Get VAT Help
VAT rules apply to food for human consumption as long as it’s suitable for human consumption and is recognized as a food or beverage.
Foods that can be consumed as part of a meal or a snack, as well as ingredients such as sugar and flour, are included. Dietary supplements, food additives, and medication is not classed as food even though humans consume them.
Products that are unsuitable for human consumption, including contaminated food products, and massage or cosmetic oils, could be zero-rated. However, if suitable for culinary purposes, Essential oils like olive oil and almond oil (not bitter almond oil) are charged at the standard rate. It’s worth noting that this is not food waste that is unsuitable for either human or as animal feed which is subject to the standard rate of VAT.
|Cooking essential oils
|Oils for massaging or cosmetics
If you have further questions regarding VAT on food for human consumption, we’d be delighted to help you.
Our expert team of accountants are fully up to speed with the rules regarding VAT on food and can help clear up any concerns or queries you may have.
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