In the UK most basic food stuffs are zero rated for VAT purposes. However, the definition of ‘basic’ is not straightforward and many of the foods are zero rated because of historical legislation dating back to the introduction of VAT in 1973.
VAT Notice 701/14: food has recently been updated. The notice explains what types of foods are zero rated and standard rated for VAT. The notice includes many examples of different food categories. Famously, cakes are zero rated but not all biscuits. However, biscuits wholly or partially covered in chocolate are standard rated. In a landmark case concerning Jaffa Cakes the VAT Tribunal had to decide whether a Jaffa Cake was a cake or a biscuit (in case you were wondering, the court ruled it was a cake and hence zero rated).
The main change in the updated version of the VAT notice refers to the temporary reduced rate of 5% for hospitality, holiday accommodation and attractions that remains in place until 30 September 2021. This temporary 5% reduced rate of VAT applies to the supplies of food (excluding alcoholic drinks) for consumption on the premises on which it is supplied and to supplies of hot takeaway food (excluding alcoholic drinks). The 5% reduced rate will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021, that will be effective until 31 March 2022, at which point supplies will revert to the 20% standard rate.
If you have any questions about the VAT notice or the temporary reduced rate for hospitality get in touch. Speak to your usual FC contact, email us at firstname.lastname@example.org or come and visit us.