VRS13030 - Temporary 5% VAT rate on hot food and on-premises consumption: Example Scenarios

Business Type	VAT rates prior to change	VAT rates between 15/7/20 – 12/1/21	Comments
Eat-in only café, restaurant, bar no alcohol sales	all supplies 20%	All supplies 5%	No requirement to change retail scheme.\nPrior to change SR VAT fraction applied to DGT. Post the VAT rate change the reduced rate fraction will be applied to DGT.
Eat-in only café, restaurant, bar – alcohol sales	All supplies 20%	Food and non alcoholic drinks 5%\nAlcohol 20%	Prior to VAT rate change the SR fraction would be applied to total DGT\nPost the VAT rate change;\nOption 1) Customers operating point of sale with till capability of recording two or more rates of VAT should be able to continue with POS.\nOption 2) customers could operate a direct calculation method. Retailer would mark up the alcoholic drinks sold (this would be their SR sales). DGT less the SR sales would be their reduced rated sales.\nOption 3) businesses with a turnover of less than £1M may use the Catering Adaptation per Public Notice 727 section 7 without prior agreement with HMRC.\nOption 4) If a customer with a turnover of between £1M and £130 million is operating or now requires an agreed catering adaptation method, they may amend it without prior agreement with HMRC for the period 15/07/20 to 12/01/21 providing the calculation provides a fair and reasonable result. They must then revert back to their previous scheme.
Takeaway only - only hot food and drink and cold beverages including non- alcoholic drinks but no cold food.	All supplies hot food and hot/cold drink 20%\nMay have limited cold beverages at 0%	Hot food and drinks 5%\nCold beverages 20%/0%	Business is making supplies at more than one rate of VAT both pre and post change.\nPrior to VAT rate change Retail scheme could be POS or a Catering Adaptation. Either of these schemes should still be appropriate under the new VAT rate so a change in scheme would not necessarily be required.\nIf operating POS but till system cannot recognise more than 2 different VAT rates, business may require a change in scheme.\nPost VAT rate change\nOption 1) Customers operating point of sale with till capability of recording two or more rates of VAT should be able to continue with POS.\nOption 2) customers could operate a direct calculation method. Retailer would mark up the SR and ZR beverages (this would be their SR sales and ZR sales). DGT less the SR/ZR sales would be their reduced rated sales.\nOption 3) businesses with a turnover of less than £1M may use the Catering Adaptation per Public Notice 727 section 7 without prior agreement with HMRC.\nOption 4) If a customer with a turnover of between £1M and £130 million is operating or now requires an agreed catering adaptation method, it may amend it without prior agreement with HMRC for the period 15/07/20 to 12/01/21 providing the calculation provides a fair and reasonable result. They must then revert back to their previous scheme.
Takeaway only – hot and cold food, hot and cold drinks	Hot food, hot drinks, alcohol 20%\nCold food 0%/20%\nCold drinks 0%/20%	Hot food and hot non- alcoholic drinks 5%\nCold beverages 20%/0%\nCold food 20%/0%	Business is making supplies at more than one rate of VAT but there is no eat in/eat out complications. Retail scheme Should be POS.\nIf operating POS but till system cannot recognise more than 2 different VAT rates business may require a change in scheme.\nPost VAT rate change\nOption 1) Customers operating point of sale with till capability of recording two or more rates of VAT should be able to continue with POS.\nOption 2) businesses with a turnover of less than £1M may use the Catering Adaptation per Public Notice 727 section 7 without prior agreement with HMRC.\nOption 3) If a customer with a turnover of between £1M and £130 million is operating or now requires use of a catering adaptation method, it may be used without prior agreement with HMRC for the period 15/07/20 to 12/01/21 only, providing the calculation provides a fair and reasonable result. The business must then revert back to their previous scheme.
Eat in and takeaway\nHot and cold food	On premises supplies 20%\ntakeaway hot food and drink 20%\ntakeaway cold food 20%/0%\nCold drinks 20%/0%	On premises supplies (except alcohol) 5%\nOn premises alcohol 20%\nCold beverages takeaway 20%/0%\nCold food takeaway 20%/0%\nHot food and hot beverages takeaway (excluding alcohol) 5%	Business is making supplies at more than one rate of VAT both pre and post change.\nPrior to VAT rate change Retail scheme could be either POS or catering adaptation. Either of these schemes should still be appropriate under the new VAT rate so a change in scheme would not be required.\nIf the business operated point of sale, then it’s likely they will be able to operate point of sale post the change by simply changing the liability of all eat in to 5% and all hot eat out to 5%. The till systems should already have this capability. The difficulty will be if the till system cannot record more than two rates of VAT.\nOption 1) Customers operating point of sale with till capability of recording two or more rates of VAT should be able to continue with POS.\nOption 2) businesses with a turnover of less than £1M may use the Catering Adaptation per Public Notice 727 section 7 without prior agreement with HMRC.\nOption 3) If a customer with a turnover of between £1M and £130 million is operating or now requires an agreed catering adaptation they may amend it without prior agreement with HMRC for the period 15/07/20 to 12/01/21 providing the calculation provides a fair and reasonable result. They must then revert back to their previous scheme.