Accountants for hospitality and food businesses
Cold takeaway food is zero rated and hot or eat-in food is standard rated, so your till has to split the VAT on every sale. We check the till, run payroll for your rota, set up a tronc and measure gross margin weekly.
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VAT on food at the till
The same sandwich is zero rated cold and taken away, and standard rated hot or eaten in. A business doing both has to split its takings correctly at the point of sale, on every transaction.
A till set up with the wrong rates still reconciles and the returns still file, so the error can run for years until HMRC finds it. It is the most common VAT problem in the sector, and it is corrected by setting the till up properly.
VAT rate by item
- Sandwich, cold, to take away0%
- The same sandwich, eaten in20%
- The same sandwich, heated, to take away20%
- Crisps20%
- Soft drink20%
- Confectionery20%
- Alcohol20%
Hot takeaway food and anything consumed on the premises: 20%
VAT overpaid on cold takeaway food
A café splitting eat-in and takeaway
£420,000 of annual takings. The till has been treating all food as standard rated since it was installed, including the cold takeaway that should be zero rated.
- Annual takings
- £420,000
- Cold takeaway food, which should be zero rated
- £126,000
- VAT wrongly accounted for on it: £126,000 × 1/6
- £21,000
- Ordinarily reclaimable by correcting the error
- Yes, subject to the 4-year cap
The error can also run the other way: a till treating hot takeaway as zero rated builds an assessment, plus interest and possibly a penalty. Both errors come from how the till was configured.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. This is an example and your figures will differ.
Tips and troncs
Since the Employment (Allocation of Tips) Act 2023 tips must be passed on to staff in full and a written policy is required. How they are distributed decides the National Insurance treatment, and a tronc run to a written policy gives the correct treatment.
Paid through payroll
Subject to PAYE and generally National Insurance.
Through an independent troncmaster
A properly independent arrangement can change the National Insurance position.
Hospitality tax dates
Payroll runs on multiple hourly rates, under-18 and apprentice rates, split shifts, and holiday pay for staff with irregular hours. Holiday pay errors across a large team are expensive and usually come to light when somebody leaves.
- Every shift
The till splits the VAT on each sale.
- Every payday
RTI to HMRC, on or before you pay anyone.
- Weekly
Stock counted, and gross margin measured against what the kitchen used.
- 22nd monthly
PAYE and National Insurance paid over.
- Every VAT quarter
Return and payment, one month and seven days after the period ends.
- 31 May / 6 July
P60s, then P11Ds for expenses and benefits.
Source: gov.uk VAT food notice, PAYE and tipping legislation guidance, checked July 2026. See key tax dates.
Four figures to watch each month
Business rates, rent and service charges stay the same when trade falls, so a quiet quarter hits profit hard. Break-even in covers per week shows what each week has to take.
Gross margin, wet and dry
Split between bar and kitchen sales, because a good bar margin can hide a poor kitchen one.
Staff cost as a share of sales
Tracked weekly, because rotas are the quickest cost you can change.
Wastage
Gross margin in a kitchen depends on portioning, wastage and theft as well as on the menu price. Counting stock weekly shows the margin each week.
Covers against last year
Covers or transactions against the same week last year, which strips out price effects.
What we do for hospitality businesses
Accounts and tax from £29 + VAT a month for a sole trader, £49 + VAT for a limited company
- The till and the VAT liabilityChecked against what you sell, so the VAT split is right at the point of sale.
- Payroll for a real rotaMultiple rates, split shifts, under-18 and apprentice rates, and holiday pay for irregular hours, filed on or before every payday.
- A tronc set up properlyWritten policy, compliant distribution and the right National Insurance treatment.
- Weekly gross marginMeasured from weekly stock counts.
- Break-even in coversWhat each week has to take to cover your costs.
- Rates and fixed costsRates relief checked and fixed costs reported separately.
Questions from cafés, pubs and restaurants
How much does it cost?
Accounts and tax start at £29 + VAT a month for a sole trader and £49 + VAT for a limited company, the fee rises with turnover, and the instant quote shows yours in four questions. In hospitality the drivers are the number of tills and payment channels to reconcile, staff headcount and pay frequency, whether you take delivery platform income, and whether stock is counted. A single café with one card terminal is a different job from a restaurant with three delivery apps, a bar and twenty staff on rotas. FreeAgent is included, worth up to £330 a year, and questions are covered by the monthly fee.
How do you reconcile till, card and delivery platform income?
By reconciling to the source data rather than the bank deposit. Card settlements arrive net of merchant fees, delivery platforms pay net of commission (frequently 20% to 30%) plus their own promotions and refunds, and cash banked rarely matches takings exactly. Booking the payout as revenue understates both sales and costs and produces VAT returns that are wrong. The fix is a daily takings record from the till, matched against each settlement, with fees and commission recorded as costs in their own right.
What VAT rate applies to what we sell?
Hot takeaway food and anything consumed on the premises is standard-rated at 20%. Most cold takeaway food is zero-rated. That means the same sandwich can be zero-rated or standard-rated depending on whether it is heated and where it is eaten, and your till needs to be configured to capture the difference at the point of sale rather than by estimate afterwards. Alcohol, confectionery, crisps and soft drinks are standard-rated regardless, which is why a mixed menu needs the till doing the work.
How do we handle tips and service charge?
Under the Employment (Allocation of Tips) Act, qualifying tips must be passed to staff in full and fairly, employers cannot make deductions, and a written policy and records must be kept. The tax treatment then depends on how they are distributed: tips paid through payroll are subject to PAYE and generally National Insurance, whereas a properly independent troncmaster arrangement can change the National Insurance position. Getting the structure wrong creates both a tax liability and an employment law problem, so it is worth setting up deliberately.
Can you handle payroll for a rota-based team?
Yes: weekly, fortnightly, four-weekly or monthly, with RTI filed every run and auto-enrolment assessed each period. Hospitality payroll has its own recurring problems: high turnover means constant starters and leavers, variable hours mean someone’s auto-enrolment status can change from month to month, and holiday pay for irregular hours has to be calculated properly rather than assumed. Send us the changes by an agreed cut-off date and the run goes ahead without further chasing. See payroll and pensions for what is included and how it is priced.
Finance support for growing hospitality businesses
Accreditations and partnerships
