Industry sector: Retail and wholesale

Butcher: VAT

Butchers and VAT

The goods supplied by your business will be taxable for VAT purposes at either the zero or the standard rate.

Taxable supplies

You must register for VAT once your sales have reached the current VAT threshold. You may 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'.

There are two main rates of VAT:

  • standard rate (currently 20%)
  • zero 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.

Standard or zero rated?

The supply of most food and drink for human consumption is currently zero rated, so you would not need to charge VAT on many of the meat and meat products that you sell. However, supplies of food and drink made in the course of catering are standard rated. This would include hot food and drink to take-away. For example, you might heat up pasties, sausage rolls and similar items in a microwave for people to buy at lunch time - these would be standard rated.

However, you do not need to standard rate goods which are sold while still warm simply because they happen to be freshly cooked.

You can contact the VAT Helpline on 0300 200 3700 which will be able to give you further guidance. 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. You can also download helpful publications from the website, such as 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 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 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.

Payment support service

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.