Does a hot pasty carry VAT when a cold sandwich doesn't? Eating in is always standard-rated at 20%, whatever the temperature. Cold takeaway food is zero-rated, unless it is a type that is always standard-rated, such as crisps, sweets and bottled water. Food counts as hot when it is above the ambient air temperature and meets one of five tests, and HMRC's own example shows a pasty sold warm because it is freshly baked and cooling is zero-rated, while the same pasty kept under a heat lamp is standard-rated. An optional service charge is outside the scope of VAT; a compulsory one follows the meal. If a restaurant keeps a no-show deposit, VAT is due on the amount paid. VAT records are kept for at least 6 years. Rates as they stood on 23 October 2026.
What the film covers
- The sandwich, the pasty and the quarter rebuilt from paper
- Before the Budget: a dated note
- Do restaurants charge VAT? The three-line rule
- VAT on takeaway food: what makes food hot
- Premises, seating and apportionment
- Meal deals, mixed supplies and the temporary children's meals rate
- Service charge and tips
- Deposits, no-shows and advance payments
Questions the film answers
- Do restaurants charge VAT on food?
A VAT-registered restaurant charges 20% on food and drink eaten on the premises, whatever the temperature. Hot takeaway food is also standard-rated, and cold takeaway food is zero-rated unless it is a type that is always standard-rated. Registration is triggered by the £90,000 threshold covered below.
- Is there VAT on hot takeaway food?
Yes. Hot takeaway food and drink is standard-rated when it is above the ambient air temperature and meets one of five tests: heated to be eaten hot, heated to order, kept hot after heating, in heat-retaining packaging, or advertised as hot. Cold takeaway food is generally zero-rated.
- My takeaway pasties are warm, not hot. Do I charge VAT?
It depends on the tests. HMRC's example says a pasty sold warm only because it is freshly baked and cooling, with none of the five tests met, is zero-rated. Put it under a heat lamp and test 3 is met, so the sale is standard-rated. Advertise it as hot and test 5 is met.
- Is VAT charged on service charge?
A compulsory service charge forms part of the consideration for the meal and follows its liability, so on an eat-in bill it carries 20%. An optional service charge is outside the scope of VAT. A tip freely given above the total charge has no VAT either.
- Is VAT due on a deposit for a cancelled table?
Yes, if the restaurant keeps it. HMRC says that where a payment is retained for a supply the customer fails to take up, "VAT is due on the amount paid". A £10 a head deposit on four guests is £40.00, with £6.67 of VAT inside it. If the deposit is refunded, the VAT can be reclaimed on the next return.
- What is the restaurant VAT threshold?
£90,000 of taxable turnover in the last 12 months, or expected within the next 30 days. Zero-rated sales such as cold takeaway count towards it. A business may deregister if taxable turnover falls below £88,000. Both figures took effect on 1 April 2024.