Hot takeaway food and catering VAT

Food that would otherwise be zero rated becomes standard rated when it is supplied in the course of catering. Under Note (3) to Group 1 of Schedule 8 to the VAT Act 1994, that includes any food supplied for consumption on the supplier’s premises and any hot food supplied for consumption off them. Since 1 October 2012 the law has defined both hot food and premises in detail, so the same sandwich or pasty can be zero rated or standard rated depending on where it is eaten and how it is kept and sold.

What counts as catering for VAT?

Group 1 zero rates food of a kind used for human consumption except where the supply is made in the course of catering (the wider food rules are covered in food and VAT). Catering has its ordinary meaning, plus the two extensions in Note (3). HMRC’s VAT Notice 709/1, paragraph 2.1, describes ordinary catering as the supply of prepared food and drink with a significant element of service, for example:

• meals in restaurants, cafés and canteens (other than cold takeaway food)
• event catering for weddings, parties and conferences
• a chef cooking or preparing food in the customer’s home
• delivery of cooked, ready to eat meals

Retail sales of cold takeaway food and groceries are not catering. Nor is food the customer must prepare before eating, which HMRC says includes thawing, cooking, reheating or arranging on serving plates. Packed meals supplied as part of an event or a coach trip are catering and standard rated. A service charge is standard rated, but a tip freely given on top of the bill carries no VAT.

What does ‘premises’ mean?

Anything supplied for consumption on the premises where it is supplied is catering, even a cold sandwich or a bottle of milk. Note (3A), added from 1 October 2012, says a supplier’s premises include any area set aside for the consumption of food by that supplier’s customers, whether or not the area is also used by customers of other suppliers. A table in a shared food court therefore counts for every outlet around it.

Before that, the Court of Appeal had narrowed the concept in Compass Contract Services UK Ltd ([2006] EWCA Civ 730). HMRC had argued that the whole restricted access BBC Television Centre site was the premises of a contract caterer running about 14 outlets there. The court agreed with Compass that only the units it controlled were its premises, so cold food taken away from them was zero rated (VFOOD4560).

Notice 709/1, paragraph 3.2, gives examples. For a restaurant, premises include the whole restaurant plus tables and chairs on an adjacent pavement or concourse. For a supermarket, they include seating areas inside and outside the shop for customers. Premises do not include seating provided for the general public rather than food customers, such as benches in a shopping centre, public picnic tables that the retailer does not clean, or waiting areas in stations and airport lounges.

Where a business sells cold food both to eat in and to take away, it must apportion its sales. If the correct rate cannot be captured at the point of sale, it must keep evidence to support a fair and reasonable split (paragraph 3.3).

When is takeaway food ‘hot’?

Hot food has been excluded from the zero rate since 1 May 1984 (VFOOD4120). Since 1 October 2012, Notes (3B) to (3D) set out a precondition and five tests. The precondition is that the food, or any part of it, is hot when provided to the customer, meaning above the ambient air temperature. If so, it is standard rated if any one of these applies:

1. it has been heated for the purposes of enabling it to be consumed hot
2. it has been heated to order
3. it has been kept hot after being heated
4. it is provided in packaging that retains heat, or packaging specifically designed for hot food
5. it is advertised or marketed in a way that indicates it is supplied hot

Note (3C) says food is kept hot if the supplier stores it somewhere that provides, applies or retains heat, or takes other steps to slow its cooling. Under test 1 it is the supplier’s purpose that counts, not the customer’s. Notice 709/1, paragraph 4.3, says that describing food as freshly baked does not meet test 5. Making a microwave available for customers to heat their food makes the sale one of hot food, whether or not a charge is made (paragraph 4.5).

A single item with a hot and a cold part, such as a bacon roll or a baked potato with a cold filling, is standard rated as a whole. A meal deal of separately available items, such as a burger, chips and a milkshake, is a mixed supply and the price must be apportioned on a fair basis. Free condiments are ignored.

How have the courts applied the hot food rules?

Toasted sandwiches were the main battleground before 2012. In Sub One Ltd, trading as Subway, the tribunal found the toasted subs were above ambient temperature and were heated so they could be eaten hot, taking account of the speed of service, the powerful ovens and the loss of character once cold. The Court of Appeal later rejected arguments that the hot food exclusion breached EU principles of fiscal neutrality and legal certainty, confirming the UK rules (VFOOD4320). The 2012 tests now settle most of these disputes, because heating to order is enough by itself.

How does this work for a bakery or café?

Notice 709/1, paragraph 4.4, uses a pasty to show the tests. A pasty baked and left to cool naturally, sold in a plain paper bag and advertised as freshly baked, is zero rated even if still warm. If the baker keeps pasties under heat lamps, test 3 is met. If it advertises them as hot, test 5 is met. Either way they become standard rated.

Illustration only. A café sells a cold sandwich for £4.20 including any VAT. Taken away, it is zero rated and the café keeps the whole £4.20. Eaten at one of the café’s tables, it is standard rated and £0.70 of the price is VAT (one sixth). A hot pasty from the heated cabinet at £3.60 is standard rated wherever it is eaten, so £0.60 is VAT.

Are there special rules for schools, hospitals and contract caterers?

Yes. Where a school, college or university supplies exempt education to its own pupils, its catering to them is also exempt; a local authority or academy school supplying non business education treats catering at or below cost as non business. Hospitals and similar institutions supply exempt food to patients in the course of their care. In both cases, catering sold to staff and visitors is taxable (Notice 709/1, paragraphs 2.6 and 2.7). Contract caterers must decide whether they act as principal, accounting for VAT on meals, fees and subsidies, or as agent, where the owner of the facility accounts for VAT on the meals; the general tests are in agent or principal for VAT.

A temporary 5% rate applied from 25 June 2026 to 1 September 2026 inclusive to children’s meals held out for sale only as meals for children and eaten on the premises of a restaurant, café or similar establishment. Takeaway meals did not qualify, and HMRC treated a child as anyone under 18 (Revenue and Customs Brief 5 (2026)). That period has ended, so the normal standard rate applies again.

What mistakes come up most often?

• Zero rating cold food eaten at outside tables or in a shared seating area set aside for food customers.
• Treating baked goods as freshly baked while keeping them in a heated cabinet or warming oven.
• Handing over warm products in foil lined bags or insulated boxes, which meets test 4 even if no other test applies.
• Failing to keep evidence to support the split between eat in and takeaway sales.
• Zero rating packed lunches supplied as part of an event package.

Takeaway and restaurant businesses are a regular focus of HMRC enquiries, and point of sale records are central to them; see electronic sales suppression and HMRC VAT compliance checks.

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Related Accountapedia entries

• VAT on room and venue hire
• VAT on restaurant tips and service charges
• VAT rates: standard, reduced and zero
• Single or multiple supplies for VAT
• Promotional offers and VAT

Sources

• legislation.gov.uk: Act 1994 c. 23, schedule 8
• GOV.UK: Catering takeaway food and vat notice 7091
• GOV.UK: Manual page VFOOD4540
• GOV.UK: Manual page VFOOD4560
• GOV.UK: Manual page VFOOD4120
• GOV.UK: Manual page VFOOD4320
• GOV.UK: Temporary reduced rate of vat for childrens meals tickets and family a

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.