Food sold for people to eat is zero rated as a starting position. Catering, which HMRC describes as supplying prepared food and drink with a real element of service, is standard rated at 20%. A takeaway sale is not catering in the usual sense, so cold food taken away keeps the zero rating. Hot food is pulled back into the standard rate by a specific test.

When hot takeaway food carries VAT

Food you sell hot is standard rated if it is above the surrounding air temperature and at least one of these applies:

• it has been heated so the customer can eat it hot
• it is heated to order
• it is kept hot after cooking, on a counter or under a lamp
• it is in packaging that holds the heat in
• it is advertised or sold as hot food

In practice almost everything coming off a hot counter meets one of those. Chips, kebabs, hot pies kept under a lamp, a jacket potato made to order, a hot coffee. All 20%.

Cold takeaway food is usually zero rated

A sandwich made that morning and sold cold, a cold pie from the chiller, a salad box, a loaf, a cake. Those are zero rated when the customer takes them away. Food that happens to be warm because it only just came out of the oven and is cooling down, such as bread and pastries left on an open shelf, is treated as cold, because it is not being kept hot for the customer. That distinction matters to bakeries with a morning rush, and HMRC has looked at it closely.

Go through your menu with this test and mark each line before you touch your till settings.

If the customer eats on your premises, the sale is catering and carries VAT at 20%. It does not matter whether the food is hot or cold. A cold tuna sandwich eaten at one of your tables is standard rated. The same sandwich in a bag, walked out of the door, is zero rated.

What counts as your premises

Your premises means the areas you occupy or share for the purpose of serving customers. Your own seating is obvious. A shared seating area in a food court or a shopping centre also counts, even though you do not own the chairs. Tables you put on the pavement under a licence count. A public bench twenty yards down the road does not.

The question your staff ask at the till

Because the answer sits with the customer, the question has to be asked and the answer has to be recorded. Two buttons on the till, eat in and take away, with the eat in button set to 20% across every product. If staff default to one button when they are busy, your VAT return is wrong in a way that is very hard to unpick six months later.

Where the rate is the same either way, for example hot chips, the split still matters if you ever move to a retail scheme or want to defend your figures. HMRC officers visiting a takeaway often start by watching the till for an hour, then asking for the Z readings for the same period.

Write the eat in and take away rule on a card by the till, so part-time staff see it.

Zero rating is the general position for cold food, and then a list of exceptions pulls plenty of items back to 20%. These are standard rated even when cold and taken away:

• confectionery, including chocolate bars and sweets, and chocolate covered biscuits
• crisps, savoury snacks made from potato or cereal, and roasted nuts
• ice cream, ice lollies and frozen yoghurt
• soft drinks, bottled water, fruit juice and energy drinks
• alcohol

The borderlines that cause arguments

Cakes are zero rated and chocolate covered biscuits are standard rated, which is why the Jaffa cake case still gets quoted thirty years on. Flapjacks are generally treated as cake, while many cereal bars are taxed as confectionery. Plain nuts in their shells are zero rated, roasted and salted nuts are not. Milkshakes made with milk are zero rated, while a fizzy drink is not.

For a shop selling hundreds of lines, the practical answer is a product list with a rate against each line, kept in the same place as your stock file and reviewed when you add a new supplier. We do this with retail clients once and then update it as the range changes.

Meal deals and bundles

A meal deal combining a zero rated sandwich, standard rated crisps and a standard rated drink for one price is a mixed supply. You apportion the price across the components on a fair and reasonable basis and keep your working. Charging 20% on the lot overpays HMRC; charging nothing underpays it.

Pull your top fifty selling lines and rate each one before your next return.

The flat rate scheme lets you pay a set percentage of your VAT inclusive turnover instead of working out output tax less input tax. You can join if your VAT exclusive turnover is expected to stay under £150,000, and you leave once total turnover goes over £230,000. You still charge customers the normal rates; the percentage only decides what you hand over.

Choosing the right category

HMRC’s list puts catering services, including restaurants and takeaways, at 12.5%, and retailing food, confectionery, tobacco, newspapers or children’s clothing at 4%. The category follows what your business does, so a hot food counter sits under catering whatever the mix of sales looks like. Using the 4% category when most of your takings are standard rated hot food is the kind of thing that gets picked up on a VAT check, and the correction runs back over every return.

Why flat rate often suits a takeaway badly

Zero rated sales count in your flat rate turnover. A bakery selling three quarters zero rated bread and cakes would pay the flat percentage on all of it, including the sales that carry no VAT at all. That is usually far worse than the standard method. The scheme also blocks input VAT recovery apart from capital assets costing more than £2,000 including VAT, so a refit or a new oven under that figure gets no reclaim.

There is a 1% discount in your first year of VAT registration, and a limited cost business rate of 16.5% if your goods spending is low. Run both methods on a real quarter of figures before you decide, and keep the comparison on file.

Check HMRC’s flat rate scheme guidance for the full category list.

The Chancellor announced a temporary 5% rate for children’s meals and certain family attraction tickets in a statement on 21 May 2026. The legislation came into force on 25 June 2026 and the reduced rate ran to 1 September 2026 inclusive. It has now ended, so the standard rate applies again.

Who it actually applied to

Two conditions had to be met together. The meal had to be held out for sale only as a meal for children, and it had to be supplied as catering by a restaurant, café or similar establishment for eating on the premises. A takeaway sale did not qualify. HMRC treated a child as anyone under 18, because the legislation did not define one.

Smaller portions of an adult dish, lower calorie options, discounted adult meals and sharing plates were outside the relief. A children’s menu, priced and presented as such, was inside it for eat in sales.

Why it still matters this autumn

If you run a café with a children’s menu and applied 5% between those dates, the returns covering that window need to hold up. HMRC can look back at them. Keep the menus you used, the till programming records for the period, and the daily takings showing the reduced rate lines separately. If you applied the rate to takeaway orders or to smaller adult portions, the correction is better made by you than found by an officer.

Dig out your summer menus and till reports and check them against your returns for that quarter.

VAT checks on food businesses have become more common, and they nearly always start with the till. An officer wants to see that your declared split between standard and zero rated sales matches what the shop actually sold.

What to keep

• daily Z readings, kept and filed, showing the split by rate and by eat in or take away
• purchase invoices, so the officer can compare what you bought with what you declared selling
• cash records and banking, including takings not banked
• delivery platform statements for every app you use
• your product list with the VAT rate against each line

Delivery apps

When an order comes through a platform, your sale is normally the full price the customer paid, not the money that lands in your bank. The platform’s commission is a separate cost to you with its own VAT on it, and you reclaim that in the usual way if you are on standard VAT accounting. Treating the net payout as your turnover understates your sales and your output tax, and it shows up quickly when HMRC compares your bank to your returns.

Making Tax Digital

VAT registered businesses keep digital records and file through compatible software, with digital links between the records and the return. A daily gross takings figure is acceptable, so you do not have to key in every sandwich, but the figure has to come from your till records and be traceable back to them.

Set a weekly ten minute slot to file the Z readings and download the app statements, and the quarter looks after itself.