VAT on food and drink: the eat-in, takeaway and hot-food rules

VAT on food is the rule that most reliably surprises people opening their first café. Food is widely described as zero-rated, and a great deal of it is — but the moment you are supplying food in the course of catering, or supplying it hot, the treatment changes. The same sandwich, from the same fridge, can leave your premises zero-rated or standard-rated depending on whether it was toasted and where it is going to be eaten.

That decision is made at the till, per line, dozens of times an hour, usually by whoever is on shift. This guide sets out how the treatment is determined, using HMRC's own guidance as the source, and then what that means for the till system that has to apply it. It is not tax advice — VAT liability turns on the specifics of a supply, and the rules do change — so confirm your own position with your accountant or with HMRC.

The two questions that decide the rate

Almost every food VAT question in a hospitality setting resolves to two: is this a supply in the course of catering, and is the food hot? HMRC's guidance in Food products (VAT Notice 701/14) is direct about the consequence: food supplied in the course of catering, including hot takeaway food, is always standard-rated.

• Eaten on your premises — standard-rated. Anything consumed in your dining room, café seating or pub is catering, whatever it is.
• Hot takeaway — standard-rated. Food heated to be eaten hot, or kept hot after cooking, carries the standard rate regardless of where it goes.
• Cold takeaway — usually zero-rated, with important exceptions below.

So a cold sandwich taken away is typically zero-rated; the same sandwich toasted is standard-rated; and the same sandwich eaten at your table is standard-rated whether or not it was ever warm. Three treatments, one product, decided by two questions the person at the till has to answer correctly.

The exceptions that catch cafés out

A number of items are standard-rated whatever else is true about them. These are not edge cases — for most cafés they are a large share of the basket:

HMRC updated Notice 701/14 on 8 June 2026, and it is the document to check rather than any summary — including this one. It also records that a temporary reduced rate of 7.5% applied to certain supplies of children's meals from 25 June 2026 to 1 September 2026; that period has now ended. It is worth saying plainly that while researching this article, a widely-cited secondary source reported that temporary rate as 5%. It was 7.5%. That is precisely why the primary source is the one to read.

Why UK menus are VAT-inclusive, and what that does to your maths

Prices shown to consumers in the UK include VAT. That is a consumer-pricing convention, and it has a specific consequence for how you think about margin: your menu price is not your revenue. A £12.00 main sold to a diner at the standard rate of 20% is £10.00 of net revenue and £2.00 you are collecting on HMRC's behalf. If you calculate gross profit against the menu price, every dish looks two points healthier than it is.

The arithmetic is a division, not a subtraction, and getting this wrong is common enough to have its own name among UK operators. To extract VAT from a standard-rated inclusive price, divide by 1.2 — or multiply by 1/6 to get the VAT itself.

Note what happens on a mixed basket: a zero-rated cold takeaway item contributes its full price to revenue, while a standard-rated one contributes five-sixths. Two baskets with identical totals can produce materially different net revenue. If your reporting works from gross takings alone, that difference is invisible.

What this means for your till

The rules above are not complicated to state; they are difficult to apply consistently at eleven o'clock on a Saturday. That is a systems problem, and it is the one to test when you are choosing an EPOS:

• Can one product carry two VAT treatments, switched by whether the order is eat-in or takeaway, without staff choosing a different button?
• Does changing an order from takeaway to eat-in after it is rung in re-rate the lines automatically?
• Does a modifier that heats an item — toasted, warmed — change its treatment?
• Does the system report net of VAT, so gross profit is calculated against revenue rather than takings?
• Can it show VAT by rate for a period, in the form your bookkeeping actually needs?

The first two are where most systems fall down. A till that makes staff pick "sandwich (eat in)" and "sandwich (take away)" as separate products works right up until someone picks the wrong one, and then it is wrong on the bill, wrong in the books and wrong in the VAT return. Novaryq handles VAT-inclusive pricing with an order-type-driven tax treatment, so the same menu item re-rates when the order type changes rather than relying on the correct button being pressed. See the VAT capability page for how it is configured.

Sources

• HMRC — Food products (VAT Notice 701/14), last updated 8 June 2026.
• HMRC — Catering, takeaway food (VAT Notice 709/1).
• GOV.UK — VAT registration thresholds.

Checked against these sources on 6 September 2026. VAT liability depends on the facts of a supply and the rules change; confirm your position with your accountant or HMRC.