New VAT Rules - Hot Food
05 October 2012
New VAT rules have been introduced from 1 October 2012 regarding the supply of hot takeaway food and food for consumption on premises.As a result of legal challenges over a number of years, the rules for charging VAT on hot takeaway food have been amended to ensure that such food is taxed consistently at the standard rate of VAT.
There have also been challenges to the rules regarding food sold for consumption on premises with recent disputes arising over ‘food courts’ which can be shared with other food retailers and whether tables and chairs outside a café form part of a retailer’s premises.
Under the new rules, the sale of food (and drink) is standard-rated if:
- The food (or any part of it) is hot at the time that it is provided to the customer AND
- One or more of the following 5 tests is satisfied:
Test 1: It has been heated for the purposes of enabling it to be consumed hot.
Test 2: It has been heated to order.
Test 3: It has been kept hot after being heated e.g. under heat lamps, heated cabinets, on a spit, in hot water.
Test 4: It is provided to the customer in packaging that retains heat e.g. foil-lined bags, insulated containers or in packaging specifically designed for hot food.
Test 5: It is advertised or marketed in a way that indicates that is supplied hot. This would not apply to the term ‘freshly baked’ as such goods may only be incidentally hot at the time of purchase and are normally eaten cold.
Regarding premises, the new rules define premises as:
- Areas occupied by a food retailer i.e. units from which sales are made.
- Areas that have been specifically provided for the consumption of food and drink for the retailer’s customers, whether or not the area may also be used by the customers of other food retailers. Typically, these areas with tables and chairs are regularly cleared and cleaned. Areas where anyone can sit down and rest, such as waiting areas in airports or train stations, are not included in the new definition of premises.