How VAT Works on Takeaway Food in the UK (Hot, Cold and Delivered)

Under VAT Notice 709/1, cold takeaway food is zero-rated, anything eaten on your premises is standard-rated whether it's hot or cold, and hot takeaway food is standard-rated if it's above the ambient air temperature when you hand it over and meets at least one of five tests. The same notice counts delivering cooked, ready-to-eat food as catering, which is standard-rated. For a VAT-registered counter, that decides whether a sandwich earns its whole price or five-sixths of it.

Hot vs cold takeaway and eating in: which rate applies

VAT Notice 709/1 splits what leaves your counter three ways.

• Cold, to take away: zero-rated, "as long as it's not of a type that's always standard-rated", such as potato crisps, sweets and some beverages, including bottled water.
• Hot, to take away: standard-rated if it passes the tests below. Hot takeaway drinks are standard-rated.
• Eaten on the premises: standard-rated, hot or cold. You "must always charge VAT at the standard rate" on food and drink for consumption on the premises.

The standard rate is 20%. None of this touches your prices until you're registered, because you must register for VAT to start charging VAT; the registration rules say when you have to.

When takeaway food counts as hot

The notice sets a precondition, then five tests. The sale is standard-rated if the food "(or any part of it) is hot at the time that it's provided to the customer", meaning above "the ambient air temperature", and one or more of the tests is satisfied. In the notice's words, it's:

• Test 1: been heated for the purposes of enabling it to be consumed hot
• Test 2: been heated to order
• Test 3: been kept hot after being heated
• Test 4: provided to a customer in packaging that retains heat (whether or not the packaging was primarily designed for that purpose) or in any other packaging that is specifically designed for hot food
• Test 5: advertised or marketed in a way that indicates that it's supplied hot

Hot takeaway food that fails every test stays zero-rated. The notice's example is a Cornish pasty baked off and left to cool naturally, sold still hot in a standard paper bag and advertised as "freshly baked": no test is met, so it's zero-rated.

A single item that's hot with a cold ingredient is standard-rated as a whole, and the notice's examples include hot dogs, bacon sandwiches and baked potatoes with a cold filling.

What counts as your premises

"Premises" reaches further than the building. The notice defines it as the areas you occupy or "any area set aside for the consumption of food by the food retailers' customers", even if other retailers' customers share it. Seating for the general public, such as shopping centre benches or station waiting areas, doesn't count. Its examples of premises include:

• Restaurant or cafe: the whole area, plus tables and chairs on the pavement or similar areas next to it.
• High street outlet: the outlet plus any tables and chairs outside for customers.

In a pub kitchen I worked in, the garden tables were the busiest seats all summer, and they're premises: a cold sandwich eaten out there is standard-rated.

Sell cold food to take away with somewhere to eat it, and the notice says you'll need to apportion those sales between eaten in (standard-rated) and taken away. If you can't tell at the point of sale, you must keep "satisfactory evidence to support a fair and reasonable apportionment".

The same sandwich sold three ways

Illustrative figures: a ham and cheese sandwich costing £1.80 in ingredients, £5.40 on the board however it goes out, sold by a VAT-registered cafe. At 20%, the VAT inside a VAT-inclusive price is one-sixth of it, so ex-VAT is the till price ÷ 1.2.

Cold, to take away (zero-rated)

• Price: £5.40
• VAT: £0.00
• Ex-VAT revenue: £5.40
• GP: £5.40 − £1.80 = £3.60, and £3.60 ÷ £5.40 = 66.7%

Toasted to order, to take away (standard-rated: hot, and heated to order)

• Price: £5.40
• VAT: £5.40 ÷ 6 = £0.90
• Ex-VAT revenue: £5.40 ÷ 1.2 = £4.50
• GP: £4.50 − £1.80 = £2.70, and £2.70 ÷ £4.50 = 60.0%

Eaten in, cold or toasted (standard-rated)

• Price: £5.40
• VAT: £5.40 ÷ 6 = £0.90
• Ex-VAT revenue: £5.40 ÷ 1.2 = £4.50
• GP: £4.50 − £1.80 = £2.70, and £2.70 ÷ £4.50 = 60.0%

Same sandwich, same price: two of the three routes carry 90p of VAT, and GP drops from 66.7% to 60.0%. To make £3.60 on those two you need £5.40 ex-VAT, or £5.40 × 1.2 = £6.48 on the board. At £6.50, ex-VAT is £6.50 ÷ 1.2 = £5.42 and GP is £5.42 − £1.80 = £3.62, or 66.8%. That's the arithmetic behind a higher price for the toastie and for eating in.

Your real GP depends on the mix. Sell 100 a week, half cold to take away and half toasted to take away or eaten in, and ex-VAT revenue is (50 × £5.40) + (50 × £4.50) = £270 + £225 = £495. Take off 100 × £1.80 = £180 of ingredients and GP is £315, or £315 ÷ £495 = 63.6%. Divide the whole £540 till by 1.2 and you'd call it 60.0%; take the till at face value and you'd call it 66.7%. Neither is right. How to price a takeaway menu in the UK covers the rest of the menu.

Delivered food

The notice has no single delivery rule. What it does say:

• Cooked meals you deliver: standard-rated. Its obvious examples of catering include "delivery of cooked ready-to-eat food or meals (with or without crockery or cutlery)".
• Food the customer still has to prepare: not catering, whether it's "delivered to, or collected by" them. Preparation includes thawing, cooking, reheating and plating.
• Sandwich rounds: zero-rate eligible items if you sell round buildings with no contract or agreement. Under a contract, such as catering an event, everything is standard-rated.
• A delivery charge you make: the notice points you to VAT Notice 700/24.

The notice doesn't address cold food sent out through a delivery app in so many words. If that's a real share of your takings, get the rate confirmed by your accountant before pricing on zero-rating.

Mistakes that put the wrong rate through the till

The rule behind each of these is in the notice.

• A microwave for customers. Provide one for heating takeaway food, "either before or after the till point", and you're making a supply of hot food that must be standard-rated, whether or not you charge for it.
• "Hot" on the board. That's Test 5. Swap "freshly baked" for "hot" on the notice's pasty and it becomes standard-rated.
• A heat lamp over the display. Pasties kept under one only to slow the cooling meet Test 3, so the notice makes them standard-rated.
• Foil-lined or insulated bags. Test 4 catches packaging that retains heat or is designed for hot food: the notice's hot chickens are standard-rated on their foil-lined bags alone.
• Meal deals rung through at one rate. A cold sandwich with a hot coffee to take away for one price mixes zero-rated and standard-rated items, so you'll have to "work out the tax value of each item".

Where to start

Mark every line on the menu by how it actually leaves: cold out the door, hot out the door, or eaten in. Cost each dish in the free food cost calculator and check its GP at the ex-VAT price for that route: the full price if it's zero-rated, the price ÷ 1.2 if it's standard-rated. For the GP method in full, read how to calculate gross profit on food in the UK, with VAT explained.