Business Tax

VAT & THE EAT OUT TO HELP OUT SCHEME

nrbpqflkW==

Irun a restaurant and will be registering for the Eat Out to Help Out Scheme. Since I will be offering a discount to customers on their bill, does this mean I will only pay VAT to HMRC on the discounted amount?

^kptboW=

Where a true discount given, VAT is only due on the discounted amount. However, for the Eat Out to Help Out Scheme, HMRC have confirmed that VAT will still be due on the full value of the bill, before the discount has been applied. The logic behind this is that whilst the customer is only paying part of the bill themselves, the restaurant is still receiving full payment for the meal, by way of third party consideration from the scheme.

For businesses on Invoice basis for VAT, the VAT should be accounted for on the full value of the meal in the VAT quarter that the meal is sold. That includes accounting for the VAT on the refund which might not yet have arrived from HMRC.

For businesses on cash basis for VAT, the VAT should be accounted for on each portion of the payment as it arrives. VAT on the customer payment, is accounted for in the quarter the meal is eaten. VAT on the payment from HMRC will be accounted for as and when that payment arrives.

Alongside the scheme you can continue to apply the temporary reduced rating for VAT on these catering supplies. Remember that the temporary reduced rate doesn’t apply to sales of alcohol and neither does the Eat Out to Help Scheme.

VAT example for meal for two people: Food cost – £15 Non-alcoholic beverages – £5 Total bill – £20 Total paid by customer = £10 Total paid by scheme = £10 (50% of the total bill for food and non-alcoholic drinks) VAT due = 0.95p – being 5% of £20

VAT example for meal for two people, including alcohol. Food cost – £15 Alcoholic beverages – £5 Total bill – £20 Total paid by customer = £12.50 Total paid by scheme = £7.50 (50% of the bill excluding alcohol) VAT due on food = 5% of £15 = £0.71 VAT due on alcohol = 20% of £5 = £0.83 Total VAT due = £1.54

Tax Adept offers a range of services which are specifically designed to help you and your business. You can find further information on taxsaving measures in the Resources section of our website: www.taxadept.co.uk. Please contact via telephone on 01444 230777 , or visit our website.

This article is based on current tax guidance at date of publication and may be subject to change. Any advice shared here is intended to inform rather than advise. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

Tax Adept