The till and the VAT liability
Checked against what you actually sell, so the split is right at the point of sale rather than corrected afterwards.
Hospitality and food
The same sandwich is two different VAT rates
Cold and taken away, it is zero rated. Hot, or eaten in, it is standard rated. Your till has to get that right on every transaction, every day — and when it does not, nothing looks broken until somebody looks.
What you get
- Till VAT liability checked against what you sell
- Payroll built for a real rota
- A tronc set up properly
- Weekly gross margin from stock counts
- Break-even in covers per week
- One fixed monthly fee
The numbers that decide it
Four figures worth knowing by heart
Four numbers run a hospitality week. Two of them change with the weather.
0% / 20%Cold takeaway against hot or eat-in
In fullTips to staff, since the 2023 Act
On or beforePayday — when RTI is due
£90,000VAT registration, on rolling turnover
2026/27 figures. See key tax dates and the calculators for the full picture.
Your year
Nothing on this list waits for a quiet week
Hospitality has no off-season in its compliance calendar, which is exactly why it should not be somebody's evening job.
Every shiftThe till splits the VAT. Get it wrong here and everything downstream is wrong.
Every paydayRTI to HMRC, on or before you pay anyone.
WeeklyStock counted. Gross margin is decided in the kitchen, not on the menu.
22nd monthlyPAYE and National Insurance paid over.
Every VAT quarterReturn and payment, one month and seven days after the period ends.
31 May / 6 JulyP60s, then P11Ds for expenses and benefits.
Source: gov.uk VAT food notice, PAYE and tipping legislation guidance, checked July 2026.
The thing that makes it different
The till has to get the VAT right, every single day
Hospitality has the most awkward VAT in the tax system. 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, every day.
Get the till set up wrong and nothing looks broken. The takings reconcile, the returns file, and an assessment builds quietly in the background until somebody looks. It is the single most common VAT problem in the sector and it is entirely a setup issue rather than a bookkeeping one.
On top of that sits the heaviest payroll of any small-business sector — multiple rates, split shifts, under-18 and apprentice rates, and holiday pay for staff whose hours change every week — against a gross margin decided in the kitchen by portioning and wastage rather than by the menu price.
The detail that decides it
What actually moves the numbers in hospitality
Hospitality runs on thin margins with heavy payroll and the most fiddly VAT in the tax system. These are the ones that bite.
- VAT on food is not one rate
- Cold takeaway food is generally zero rated; the same item eaten in, or served hot to take away, is generally standard rated. A business doing both has to split its takings correctly at the till, every day, and a till set up wrong quietly builds an assessment. This is the single most common VAT problem in the sector.
- 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, which is why a properly run tronc is worth setting up rather than improvising.
- Payroll is the hard part
- Multiple hourly rates, under-18 and apprentice rates, split shifts, and holiday pay for staff with irregular hours. Getting holiday pay wrong across a team of twenty is an expensive mistake that usually surfaces when somebody leaves.
- Stock and wastage
- Gross margin in a kitchen is decided by portioning, wastage and theft long before it is decided by the menu price. Counting stock weekly rather than annually turns a vague sense that margins have slipped into a number you can act on.
- Rates, rent and the fixed cost base
- Business rates relief, rent reviews and service charges are the costs that do not move when trade does, which is what makes a quiet quarter dangerous. Knowing your break-even in covers per week is more useful than any annual accounts.
What a mis-set till costs
One rate applied to everything
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 — should be zero rated
- £126,000
- VAT wrongly accounted for on it — £126,000 × 1/6
- £21,000
- Over four years
- £84,000
- Ordinarily reclaimable by correcting the error
- Yes, subject to the 4-year cap
- Overpaid, on one till setting
- £84,000
It runs the other way just as easily: a till treating hot takeaway as zero rated builds an assessment instead of a refund, plus interest and possibly a penalty. Either way the whole thing is decided by how somebody configured the buttons, which is worth an hour of attention once.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. An example, not advice — your figures will differ.
What we do about it
The two hard parts, handled
Payroll for a real rota
Multiple rates, split shifts, under-18 and apprentice rates, and holiday pay for irregular hours, filed on or before every payday.
A tronc set up properly
Written policy, compliant distribution and the right National Insurance treatment.
Weekly gross margin
From stock counts rather than from the annual accounts, so a slipping margin is a number rather than a feeling.
Break-even in covers
What the week has to take before you make anything, which is the most useful figure in the business.
Rates and the fixed base
Relief checked, and the fixed costs made visible against a trade that is anything but fixed.
Questions
What people in this trade ask us
How much does it cost?
A fixed monthly figure agreed in writing after a 30-minute discovery call. 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 do not carry an hourly charge.
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.
What should I be watching each month?
Four numbers, and none of them is turnover. Gross margin split wet and dry, because they behave differently and a good bar margin can hide a poor kitchen one. Staff cost as a percentage of sales, tracked weekly rather than monthly, because rotas are the fastest lever you have. Wastage. And covers or transactions against the same week last year, which strips out price effects. A busy till does not mean a healthy business.
How do we handle tips and service charge?
Carefully, because the rules changed. 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.
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