Industry sector:

Sandwich bar: VAT


Sandwich bars and VAT

You will have to register for VAT if your taxable sales are likely to be above the current VAT threshold. You will then have to charge VAT on some of 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'.

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 or zero rated?

You are likely to sell a mixture of standard rated and zero rated things. Standard rated goods have VAT of 20% added to the selling price while zero rated goods do not have to have any VAT added to the selling price.

Zero rated items include cold takeaway food - including sandwiches.

Standard rated items include:

  • hot takeaway food and drink
  • all food and drink supplied to be eaten on the premises
  • food and drink - including cold food like sandwiches - supplied for catering
  • items such as snacks, soft drinks, confectionery and so on

You can contact the VAT Helpline on 0300 200 3700 if you need further guidance. You can also download free VAT guidance publications from the Gov.uk website, including VAT Notice 709/1 Catering and take-away food and VAT Notice 701/14 Food.

Your market research will have helped you to estimate your sales income every month. Now decide what proportion of those sales might be of standard rated items so that you can estimate approximately how much VAT you will pay to HMRC every quarter.

You will need to:

  • clearly label your sandwiches with the eat-in (VAT inclusive) price and the takeaway price
  • make sure that the till you buy can separate the standard rated sales from the zero rated sales

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.

Alternative flat rate scheme

You might be interested in an optional flat rate scheme (FRS) for eligible small businesses. Under this scheme you continue to issue tax invoices to VAT registered customers, but the VAT payable every quarter is calculated as a percentage of your VAT-inclusive turnover. You apply the appropriate flat rate percentage for your type of business. However, this scheme cannot be used with the retail schemes, the margin scheme for secondhand goods or the cash accounting scheme. You can find full details of the FRS, who can use it, and the flat rate percentages in VAT Notice 733, Flat rate scheme for small businesses. It will help you to decide whether or not the scheme is suitable for you.