Pubs and VAT
The goods and services supplied by your business will generally be taxable for VAT purposes.
If they are taxable, you must register for VAT once your sales have reached the current VAT threshold. You will have to charge VAT on the goods you sell - this is known as 'output tax'. You will be able to reclaim any VAT you pay on purchases - this is known as 'input tax'.
There are two main rates of VAT:
- standard rate
- zero rate
And some goods such as fuel for domestic use are subject to a reduced rate.
Every quarter you will pay HM Revenue & Customs (HMRC) the difference between:
- the output tax you have charged, and
- the input tax you have paid on your purchases
Nearly all businesses have to pay their VAT bill electronically - for example by direct debit or online banking. HMRC allows you some time at the end of each quarter before you have to pay the VAT due. So, for example, the VAT due on sales made in months one, two and three would be paid at the end of month four. Your VAT return will show your payment deadline date.
Businesses that are having trouble making their VAT payments, or are worried that future payments will cause them problems, can ask for help from the HMRC Business Payment Support Service. If your business needs this financial assistance to tide it over, HMRC will look at your situation and discuss temporary options that could help out. These could include letting you make payments over a longer period and waiving late payment surcharges. To discuss payment problems with HMRC you can call the Business Payment Support Service Helpline on 0300 200 3835.
Standard rated supplies
Most of your supplies will be standard rated, for example:
- alcoholic and soft drinks
- catering activities (food/drink to be consumed on the premises, including the garden)
- tobacco products
- crisps and similar snacks
- takings from games/amusement machines that offer non-cash prizes, or prizes lower than the cost of play
Your suppliers should be able to give you some guidance on this.
Machine Games Duty (MGD) is payable instead of VAT on amusement machine games that offer a cash prize that's worth more than the cost of playing the game.
Zero rated supplies
Food and drink to be consumed on the premises is standard rated, but zero rating can apply to some items, for example cold sandwiches or rolls provided as packed lunches to bed and breakfast customers (if they're not provided in with the accommodation price as part of a package) or sold as takeaways.
Your market research will have helped you to estimate your sales income every month, including VAT. Now estimate approximately how much VAT you will pay every quarter.
Making Tax Digital (MTD) for VAT
Under HMRC's Making Tax Digital initiative, VAT-registered businesses with taxable turnover above the VAT threshold must keep records digitally and use special software to submit their VAT returns. You can find out more about MTD on the Gov.uk website.
Further guidance and helpful leaflets including VAT Notice 709/1 Catering and take-away food, VAT Notice 700/1 Should I be Registered for VAT? and VAT Notice 701/29 Betting, Gaming and Lotteries are available on the Gov.uk website.
You may also want to contact the VAT Helpline on 0300 200 3700. They will also be able to advise you on using one of the retail schemes. These schemes are used by businesses which deal mainly with members of the public.
The British Beer and Pub Association website includes helpful guidance on MGD for pub operators.