ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Charities
    5. Coronavirus
    6. Corporate and financial reporting
    7. Business and governance
    8. Ethics
    9. Insolvency
    10. ICAS Research
    11. Pensions
    12. Practice
    13. Public sector
    14. Sustainability
    15. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Business Tax: VAT on food – could it be any simpler?

  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Chris Cunnane CA CTA

26 November 2020

In our latest blog, Chris Cunnane CA CTA looks at how food can be treated for VAT – one of the areas covered by our TPS Business Tax course.

All VAT transactions are classified as being either taxable or exempt. There are three types of taxable supplies – standard-rated supplies, reduced-rated supplies and zero-rated supplies. The legislation sets out what goods and services will fall into each category.

So far, so good, but the rules around VAT and food can be particularly confusing.

Most food is zero-rated for VAT, so you don’t pay VAT, but some items are standard-rated (20% VAT). This includes catering, alcoholic drinks, confectionery, crisps and savoury snacks, hot food, sports drinks, hot takeaways, ice cream, soft drinks and mineral water.

Restaurants must always charge VAT on something eaten on their premises. Restaurants and takeaways must also charge VAT on all hot takeaways or home deliveries. They don’t need to charge VAT on cold takeaway food.

As mentioned in a previous blog, under UK coronavirus measures, VAT has been slashed from 20% to 5% for businesses in the hospitality and tourism industries until January 12, 2021. KFC, McDonald's and Wetherspoons are among the high-street chains to pass on these VAT savings to customers.

The Jaffa Cake case

Still with me? The recent Subway VAT case reminded me how often the courts have been called on to decide the rate of VAT which should be charged on food.

jaffa cakes

Most people are aware of the Jaffa Cake case. A Jaffa Cake is zero-rated but a chocolate digestive, which also has a chocolate covering on the top, is standard rated. How come? Well a Jaffa Cake is a cake which is zero-rated (regardless of how much chocolate is on the cake). A biscuit is only zero-rated if it is not partly or wholly covered in chocolate and as a chocolate digestive is partly covered in chocolate, it does not qualify for zero-rating.

The Nesquick case

Then there is the Nesquick case. Nestlé argued that their flavoured powders are to encourage the drinking of milk, and should, like milk, be zero-rated. The courts disagreed. Chocolate powder is zero-rated but this has nothing to do with the fact that is linked to the drinking of milk, but because it contains cocoa which is zero-rated as a food. The strawberry and banana-flavoured powders are not a food and so are standard rated. So, we have three similar products, two are subject to VAT, one is not.

Complicated crisps

Snacks can be especially complicated. Crisps made mostly from potato are standard-rated but crisps made from cereals can be zero-rated unless the cereals are ‘swollen’. For example, tortilla chips are zero-rated as they are made from corn and not swollen but monster munch which are also made of corn are standard rated because they are swollen. Vegetable crisps (which are neither potato or cereal) are zero-rated, as are Twiglets and Mini Cheddars. Proctor & Gamble unsuccessfully argued that Pringles should be zero-rated as they are not shaped like a crisp and don’t contain sufficient potato.

Confused? I could go on.

Sugary Subway staples

The latest company to fall foul of the law on VAT and food is Subway.

a Subway sandwich

The rolls used in Subway's sandwiches contain too much sugar to be considered bread, according to Ireland's Supreme Court and therefore cannot be zero-rated for VAT. The Court distinguished between bread as a “staple” food and certain other baked goods made from dough.

VAT is a tax on businesses though and it will be up to Subway to decide whether or not to pass on these charges to customers in the price they pay. It's worth pointing out that while this ruling was made in Ireland's highest court it doesn't apply to the UK, which has its own separate VAT system.

Business Tax: COVID-19 and VAT

This blog looks at the ways COVID-19 has affected VAT, one of the areas our TPS Business Tax Students cover…

2-23-totumpro 2-23-totumpro
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: