I thought my knowledge of which items are vatable or not was quite good until I recently met with the owner of a local deli.
They have provided a few items that they sell to check if they have been doing their VAT correctly since they started 2 years ago.
The Items to be check are:
Chocolate cake (slice or whole)
Biscuits & shortbread (individual and packets)
Jars of homemade Horseradish and Tartare Sauce
Bottles of Homemade dressings
Individual and Whole Desserts
Set menu sold cold for reheating at home
I am a bit confused, can anybody assist in advising which items are vatable, exempt or out of scope. I am having a re-read of the HMRC information and it's a minefield.
Even inspectors get confused with food and VAT. Firstly, there is more to it than just VAT or non VAT. Some food items have a special rate applied.
To cover yourself, I would call HMRC and take notes of what they say, including a record of the time and date of the call and whom you spoke to.
For my knowledge, chocolate cake is VAT, biscuits it depends on the biscuits, shortbread I think is VAT but if it was me doing it I would check, horseradish and tartare suce non VAT, dressings non VAT, desserts it depends on specifics, and same for the set menu, although the default would be non VAT.
I also suggest anyone with clients who deals in food collects their supermarket receipts for reference (that's yours, not the clients). They have a star next to the VAT applicable items which over time would provide a good reference STARTING point. I say starting point as supermarkets are selling food in a particular way, and VAT depends on HOW it is sold as well as what it is, and it doesn't tell you the VAT rate.
For anyone having trouble sleeping at night, I suggest the case of M&S v HMRC about teacakes, the wrapped ones, rather than the currant baked yeasty ones.
For completeness, I also suggest you eat Jaffa cakes while on the phone to HMRC. Biscuit (non VAT as a rule), cake (VAT)... you decide.
My main point is that the issue as a bookkeeper is having records to prove that you took reasonable care to get your client in the correct legal position. Hence I suggest call HMRC and take details of the call. Then if questioned, you have a very good source of reference for why you have charged VAT or not on items as you have.
She was paid to say that. She shouldn't have been fired from the BBC anyway. Moira Stewart, that's her.
I'd charge for hold time, BUT it is the cheaper option than the tax and fines your client would be paying if HMRC ever went near them. Especially if it was one of those not in the real world inspectors who have their little fiefdoms. Not that would ever happen I am sure.
Have some frozen yoghurt (standard rate) or frozen yoghurt designed to be thawed before being eaten (zero rate).
Logic does not apply to VAT rules in any way. Ready meals, famous for having little nutritional value whilst being high in salts and fats are vat free, yet essential items like ladies maternity sanitary products carry a VAT rate of 5% (thank you Margaret Thatcher) as do child safety seats. You would think that luxury items would be subject to VAT, whilst essential items not.
Anyone remember the case with HMRC V McVities? HMRC tried to say that Jaffa Cakes were a biscuit, therefore subject to VAT. Mcvities argued they were a cake. Tens of thousands of pounds of taxpayers money was spent taking the company to court, Mcvities used the whole thing as a PR coup, baking a giant jaffa cake that was paraded around London on the back of a lorry, and at the end of it all, HMRC lost. So there we have it, a jaffa cake really is a cake.
I would put it down as a consumable... Sorry, couldn't resist.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
You would think that luxury items would be subject to VAT, whilst essential items not.
And this is how it was sold, (not in this country as we had no choice really but it was still sold to us as a good idea regardless), but certainly in Australia. They were given a chance to vote for it or not. The reasoning given to them was simple, if you vote for GST we will only apply it to luxury products and reduce your income tax, so therefore if you are a big spender on luxury goods you pay more tax, if you are good with your money and only spend it on essential items then you pay less tax, simples. Of course we Brits know full well that it isn't ever going to stay like that, and the poor Aussies got sucked right in. I remeber a friend of mine over there stating it was a great idea, all I could do was cringe, advise him not to and leave it at that.
