The takeaway tax: café and coffee shop mistakes

Are you a frequent customer of coffee shops? (Who isn't these days?) Have you ever noticed the questions you're always asked on almost every single order?


"Would you like your sandwich heated? Black or white coffee? Eating in or take out?"


As a customer you'd think the last question is pretty irrelevant right? well you'd be amazed as to the reason why these questions are asked! It is an essential query so that the stores can stay correct with the taxman.


VAT Rules on your takeaway food


Certain goods and services are considered essential, and these are classified as 'zero-rated' - meaning there is no addition of VAT on these items.


Cold sandwiches are among the 'zero-rated' list - but only if they're consumed off the premises. If you eat-in you'll end up paying a higher price for the same food as the sale is now subject to VAT at the standard rate.


Another cool fact is that if you ask for your cold sandwich to be heated up, you're instantly subject to standard rate VAT! Regardless of whether you eat-in or takeout.


Why worry?


For the general consumer, there's nothing to worry apart from being charged VAT when you shouldn't be, but the worries aren't as little for a business.


Generally, the rules are quite simple, but it can be very easy amid a high pressure lunch hour to make a mistake and misstate the sales. It's not easy for the staff too! All those extravagant menus only add to the pressure.


For most businesses, I'd say they'd usually have overstated zero-rated sales, usually because staff don't always ask the right questions such as whether the customer is eating in or not - but they'd charge zero-rated as their standard go to.


Due to the nature of this error, and how popular coffee shops have become in the UK recently, it is a sector which HMRC do pay close attention to - as it could mean a heap of VAT they may be missing out on.


How to avoid the mistakes


Staff training is key, they are the face of the business and will be the ones processing the sales. Teach them the correct way of identifying whether the sale is subject to VAT. Don't overcomplicate this training though, as this can become quite costly given the high staff turnover in this sector.


If in the event of a investigation by HMRC they question your sales, there's a high chance they'd recognise the VAT mistakes as genuine errors, as long as there was no intention to mislead. This still could leave you with a hefty VAT bill at the end.


Conclusion


Restaurants, cafes, and takeaways can benefit greatly from working with a specialist accountant. If you hadn’t noticed already, we are specialist accountants in Leeds for food service businesses, so unlike most accountants, we have years of experience working with businesses just like you. If you're interested in finding out more about how we can help your restaurant become more profitable, book a call with one of our accounting experts or call us on 0113 240 4100.