Understanding VAT on food and drink
The VAT treatment of food, drink and catering has long been a problematic area. Anyone in the accountancy world and even further afield, will be aware of the celebrated Jaffa Cakes VAT argument and now the M&S Strawberries and Cream sandwich, launched in the run up to Wimbledon 2025, has caused a degree of commotion and amusement.
Food and drink can be extremely difficult to navigate when it comes to VAT and manufacturers and retailers of food products do not always get it right. Is a manufacturer or retailer of food and drink products certain that it is correctly zero rated?
Challenges due to outdated legislation
With more products on the market, utilising different ingredients for specialist dietary requirements, with advanced manufacturing techniques for an ever increasing range of purposes, it is not easy to tell where a product might fall within the VAT rates available, particularly as VAT legislation in this area is many years old and does not necessarily apply to new products.
Defining your product category
Is the product a standard food product, or is it a snack, or confectionery? Due to the complexity, there has been a huge amount of case law around VAT and food and drink items and this does not seem set to change in the future.
Our VAT team would be happy to assist with a review of products, in order to determine whether the correct VAT rates are being applied and compile and submit any necessary historic claims for overpaid VAT. The amounts at stake can often be substantial.
How Menzies can help
Menzies has assisted clients in the past in classifying food products and dealing with HMRC, including a refrigerated dessert snack, dried fruit snacks with dual use as baking ingredients and keto diet snack products.
If there is no scope for a claim, it is still worth reviewing products, to provide comfort that the correct VAT treatment is being applied and to avoid having to submit future disclosures, or being the recipient of an assessment from HMRC. If necessary, a clearance application can be submitted to HMRC, in order to seek a ruling on the VAT treatment.
The unknown VAT claim deadline
It is worth noting that there was a window of opportunity between 15 July 2020 and 31 March 2022, where during Covid, temporary reduced rates applied to hospitality, covering some food and drink. This window has started to close with the VAT four-year cap, but an opportunity for a review still exists up to 31 March 2026, so is worth exploring sooner rather than later.
Our VAT Specialists are here to help
If you are interested in a discussion around the supply of food and drink and whether there might be scope for a claim, please do get in touch with one of the Menzies VAT team, or your usual Menzies contact.
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