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Home / Business  / VAT in Hospitality – Are you up to date?

VAT in Hospitality – Are you up to date?

My first point on this is – VAT is tricky.

Recently I started working with a café and, as part of our onboarding process, we looked at their till system setup and noticed many of the VAT rates were incorrect. The rates had been put into the tills by the company who had sold them the till system. This company was based outside of Ireland and had set up the VAT rates on the basis that someone else was going to verify their accuracy. Unfortunately this has never happened and as a result, many of the products were set up with incorrect VAT rates.

So, what are the common mistakes made by many restaurant and bars?

Hotels, restaurants, canteens, pubs, etc. should separate food and drink items where these are supplied with a meal and where they are sold on their own.  For example, fruit juices supplied with a meal has a 13.50% VAT rate. Fruit juices sold on their own attract the 23% VAT rate.

Another one to watch out for is where there is a meal offering with a grouping of different individual items that attract different VAT rates. The common mistake is to use the reduced rate of VAT for the whole offering. In fact, per revenue, the correct way of dealing with this is to separate these out for the purpose of charging VAT or apportion the discount to all the items of the meal at their appropriate rates of VAT.

The supply of hot food is liable to VAT at the reduced rate. Cold, zero-rated food supplied with hot food for an inclusive price (for example, coleslaw with hot chicken) is liable at the reduced rate.

Cakes will typically attract the reduced rate of 13.50%, whereby chocolates, confectionery, biscuits (chocolate covered) are charged out at the standard rate of tax, unless with a meal.

For full details on revenue’s guide to VAT on Food and Drink, click here.
*Please note that this blog is for reference purposes and not issued as tax advice.

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