There’s no VAT on food, is there?
It’s commonly believed that all food is zero-rated. But is it really as simple as this? In fact, some foodstuffs are subject to standard-rated VAT and the rules can be complicated and confusing.
Most food for human consumption is zero-rated. But inevitably there are a number of exceptions where the standard rate applies:
- Any food supplied in the course of catering – so meals in restaurants, from takeaways, etc.
- Ice cream and similar products, as well as mixes for making them.
- Confectionery, apart from cakes and some biscuits.
- Alcoholic drinks and home brewing and wine making kits.
- Other beverages and preparations for making them – so soft drinks, fruit juices and even bottled water.
- Potato crisps, roasted or salted nuts and some other savoury snack products.
You can zero-rate all supplies of unprocessed foodstuffs such as raw meat and fish, vegetables and fruit, cereals, nuts and pulses and culinary herbs. This applies whether you supply them direct to the public or for use as ingredients in the manufacture of processed foods, provided they are fit for human consumption. A product such as flour, which, although not eaten by itself, is a recognised food ingredient and so zero-rated.
Exemptions to the exceptions
As you would expect HMRC has to complicate the matter. The following are zero-rated:
- Frozen yoghurt that’s designed to be thawed before being eaten.
- Drained cherries and candied peel.
- Milk and milk drinks, tea, herbal tea, coffee and cocoa and preparations of yeast, meat and egg.
However, dietary supplements, food additives and similar products, which, although edible, aren’t food and aren’t covered by the zero-rating are standard rated.
Biscuits covered or partly covered in chocolate or some other products similar in taste and appearance to chocolate are standard-rated but not chocolate chip cookies or Jaffa Cakes – which are classed as cakes and not biscuits.
Remember the “pasty” tax?
Many retail bakeries produce freshly baked products on the premises, particularly bread, pies, pasties and other savouries which are sold whilst still hot. If you sell products that are incidentally hot simply because they are freshly baked and cooling down, they can be zero-rated. However, if you sell hot food specifically for consumption whilst still hot, then this is a supply in the course of catering and so standard-rated.
If you’re in this sector, don’t advertise your products in such a way as to fall foul of HMRC’s rules. For example “Try our delicious hot pasties” would be a no-no.
Animal and pet foods have their own rules. Basically, pet foods are standard-rated – this would even include a butcher selling bones held out for sale as pet foods not just tinned pet foods from a supermarket. Other animal feed can be zero-rated.