VAT for Restaurants: A Complete Guide to Rates, Service Charges, and Delivery Platforms 

VAT for restaurants in the UK generally applies at the standard 20% rate to food and drink eaten on the premises, hot takeaway food and drink, and alcohol. Qualifying cold takeaway food is zero rated. The exact rate depends on where and how the item is sold, which is why restaurants often apply several VAT rates on a single bill.

Service charges, delivery-platform fees, tips, and promotional discounts can also affect how much VAT a restaurant accounts for, making accurate records essential. 

Picture a busy Friday evening: Delivery orders are pinging via several apps, tables are full, and staff are handling service charges, cash tips, and card payments. For customers, it’s just a good dinner. However, for a restaurant owner, each transaction may carry a different VAT treatment: a coffee order placed through a delivery app, a hot dinner eaten at the table, a cold sandwich picked up at the counter, and an optional service charge may all need a different VAT record. Get it right and your VAT return will accurately reflect the state of the business.

A coffee order placed through a delivery platform, a hot dinner consumed at a restaurant table, a cold sandwich picked up at the counter, and an optional service charge may all require a distinct record. If you do it correctly, your VAT return will accurately represent the state of the company. Small everyday mistakes can easily result in penalties, an unexpected VAT charge, or a challenging reconciliation at the end of the quarter. 

This blog explains how VAT for restaurants works in practice, including the VAT rates applicable to food and drinks, how to treat service charges and tips, and what to consider when selling through delivery platforms such as Uber Eats, Deliveroo, and Just Eat. 

VAT rates that apply to restaurants 

In 2026, restaurants in the UK are generally subject to the ordinary 20% VAT rate. This includes hot takeaway food and beverages as well as food and non-alcoholic beverages consumed in the restaurant premises. 

When a restaurant’s taxable turnover surpasses £90,000 in the previous 12 months or when it expects that its taxable turnover will surpass £90,000 within the next 30 days, such restaurants are required to register for VAT. Restaurants that fall below this criteria have the option to register voluntarily. The deregistration threshold sits £2,000 lower, at £88,000, for restaurants whose turnover later falls back down.

Restaurant sale	UK VAT rate in 2026	Common Example
Food or drink consumed on the premises	20%	A customer eats a burger, salad or dessert at a restaurant table
Hot takeaway food	20%	Pizza, hot chips, curry, cooked breakfast or a heated pastry sold to take away
Hot takeaway drink	20%	Freshly prepared coffee, tea, soup or hot chocolate
Qualifying cold takeaway food	0%	A cold sandwich, salad or bakery item taken away
Alcoholic drinks	20%	Beer, wine, cider, cocktails and spirits
Cold drinks	Product-dependent	All cold drinks are not zero-rated, it depends on product type.

Eating in vs Takeaway — the distinction restaurants can’t ignore 

VAT for restaurants can differ depending on where the customer consumes the food. Food and drinks eaten inside a restaurant are generally treated as catering and charged at the standard 20% VAT rate. Qualifying cold food sold to take away will be zero-rated, while hot takeaway food and drinks are normally still subject to 20% VAT. 

Quick example: 

A customer buys a cold sandwich to take away for £6. It will be zero-rated, so the restaurant charges £6 with no VAT added.

If the customer eats the same sandwich inside the restaurant, it is treated as catering service and VAT applies at 20%.

In short: cold food taken away may be 0% VAT, but food eaten in the restaurant will be 20% VAT.

When is hot food standard-rated?

Under HMRC’s rules for hot takeaway food (VAT Notice 709/1, section 4.2), a sale is standard rated if the food is hot at the point it is given to the customer, and at least one of the following applies: it was heated so it could be eaten hot, it was heated to order, it was kept hot after cooking, it was given to the customer in packaging that retains heat, or it was advertised or marketed as hot.

For example, a sausage roll kept under a heat lamp or marketed as “hot” is normally standard-rated. However, a freshly baked pastry that is simply cooling naturally and sold as “freshly baked”, rather than as hot food, may not automatically be standard-rated. 

HMRC also runs a temporary reduced rate of VAT on certain children’s meals from 25 June 2026 to 1 September 2026. Restaurants offering children’s menus during this window should check whether their qualifying items fall under the reduced rate rather than the standard rate.

VAT on service charges and tips 

The VAT treatment of a service charge or tips depends on whether the customer is genuinely free to decide whether to pay it. The cost of the meal includes a mandatory service charge, which is often subject to 20% VAT. A service charge that is optional or a tip that is voluntarily paid is not subject to VAT. 

VAT on alcohol, drinks packages, and corkage 

• VAT on Alcohol sale: Beer, wine, cider, cocktails, and spirits are among the alcoholic beverages that restaurants are required to charge at the usual 20% VAT on alcohol sales UK. This is applicable whether alcohol is offered for takeout, delivered as part of a delivery order, sold at the bar, or served with food. 

• Drinks packages: A fixed-price package that includes food and alcohol, like a three-course meal with a bottle of wine, will often be subject to 20% VAT for restaurants. Make sure the EPOS system has a clear record of the bundle price and included items.

• Corkage fees: 20% VAT is applied to a corkage fee that permits customers to bring and drink their own wine or other alcoholic beverages. It is a service charge, not an alcohol sale.

VAT on delivery platforms: Deliveroo, Uber Eats, and Just Eat 

Restaurant sales made through delivery platforms such as Deliveroo, Uber Eats and Just Eat should be recorded at the full customer order value, not just at the lower amount paid into the bank after fees. 

The food’s VAT rate is still determined by what is sold; hot meals and beverages are generally standard-rated at 20%, although qualifying cold takeout may be zero-rated. The VAT rate on food sales at the restaurant is not changed by the delivery platform. 

• Record gross sales: If a customer pays £30 for a meal through a delivery app, record £30 as restaurant sales before subtracting platform commission, refunds, or other costs. Platform fees are a cost, not a reduction in sales, so recording only the amount that lands in the bank understates turnover and leads to errors in the VAT return.

• Deliveroo VAT commission: The commission paid by Deliveroo is a distinct business expense. Subject to the standard input-tax regulations and possessing a valid VAT invoice, a VAT-registered restaurant can often reclaim VAT that is charged on the commission as input tax.
• Uber Eats commission: If the restaurant has given the necessary invoice details, Uber Eats may send customer invoices or receipts in the restaurant’s name and on its behalf. To reconcile orders, fees, refunds, and net payouts, restaurants should download and keep Uber Eats Manager’s payment statements and invoices. 

• Just Eat statements: Just Eat uses Partner Hub to deliver invoices, which are generally made available on Tuesday and paid on Friday. Review each statement to determine the final net payment, commission, VAT on commission, refunds, and gross order sales. 

• Do not treat the net payout as turnover: Platform fees do not result in lower consumer sales at the restaurant. They come at a different cost. Errors in VAT returns may result from understating turnover if just the amount received is recorded in the bank. 

The Catering Flat Rate Scheme — is it worth it? 

The Catering Flat Rate Scheme can simplify VAT for eligible UK restaurants, cafés and takeaways. The restaurant pays HMRC a set proportion of its VAT-inclusive gross turnover rather than calculating VAT on each sale and recovering VAT on the majority of individual expenses. The current Flat Rate Scheme percentage for catering services is 12.5%, which includes sandwich shops, takeout, cafés, and restaurants with and without alcohol licenses. 

• Who can join: Restaurants, cafes and takeaways can join the Flat Rate Scheme if they are VAT registered and expect annual taxable sales of £150,000 or less, excluding VAT. A business must leave the scheme once its VAT inclusive turnover for the following 12 months is expected to exceed £230,000.

• How it works: VAT-inclusive gross turnover, which includes cash, card, online order, and delivery platform sales, is subject to the flat-rate percentage. Daily expenses including ingredients, rent, utilities, maintenance, marketing, and delivery-platform commission are generally not eligible for VAT reimbursement for restaurants utilising the scheme. Nonetheless, a qualifying single purchase of capital expenditure items costing £2,000 or more, including VAT, is generally eligible for VAT return. 

• New VAT registrations: A newly started restaurant can reduce its applicable flat-rate percentage by 1%, in its first year of VAT registration. This could mean using an 11.5% rate rather than 12.5% for the eligible period.

H2 Private dining, events, and corporate bookings 

Catering supplies are generally used for corporate events, office lunches, wedding receptions, and private meals. This means that restaurants often charge 20% VAT on the food, beverages, room rental associated with the meal, and mandatory service fees that are part of the reservation. 

• Private dining menus: A fixed-price menu for a birthday, wedding or private party is normally subject to 20% VAT for restaurants.

• Corporate catering: Food and drinks served for business meetings, conferences or staff events are generally standard-rated at 20% VAT. 

• Deposits: VAT is generally due when the restaurant receives an advance deposit or issues a VAT invoice, whichever happens first. 

• Service charges: 20% VAT is generally applied to mandatory service charges for large gatherings or events. A genuinely optional service charge or voluntary tip is not subject to VAT for restaurants. 

 Example: A business pays £2,000 for a private dining room that includes staff service, food, and beverages. Generally, the restaurant accounts for 20% VAT and regards the entire package as a standard-rated catering transaction. When the restaurant receives a £500 non-refundable deposit from the business, VAT is typically recorded at the time of receipt. 

Handling mixed VAT rates on one bill (EPOS and Making Tax Digital) 

Restaurants are able to display multiple VAT rates on a single consumer bill. While your accounting software must maintain digital VAT records for Making Tax Digital (MTD), your EPOS system must accurately identify each item. Businesses are required by HMRC to document the VAT rate charged and the net worth of their supplies. 

• Set up clear VAT codes in EPOS: Standard-rated sales (20%), zero-rated qualified cold takeaway meals (0%), and outside-the-scope goods like truly voluntary tips should all be coded separately. 

• Record each item at the correct rate: A zero-rated cold takeout sandwich, 20% VAT on crisps and a soft drink, and an optional tip outside of VAT may all be included in a bill. 

• Maintain a digital link: Rather than physically retyping numbers, sales should pass from an EPOS report to bookkeeping or VAT-return software via a digital link. To file VAT returns under MTD and maintain VAT data, compatible software is needed. 

Common VAT mistakes restaurants make

A few errors come up repeatedly in restaurant VAT records:

• Recording delivery platform net payouts as turnover instead of the full order value
• Charging VAT on genuinely optional service charges or tips
• Treating all takeaway sales as zero rated, without checking whether the item is hot or cold
• Missing the 30 day forward looking registration test when turnover is rising quickly
• Under HMRC’s penalty points system for VAT returns, repeated late submissions can trigger a fixed penalty even where no VAT is actually owed, so late filing carries a cost on its own

Reclaiming VAT as a restaurant business 

Restaurants that have registered for VAT are generally entitled to recover VAT on business expenses incurred in making taxable sales. This is known as input VAT. The restaurant must maintain precise digital records and present a valid VAT invoice or receipt in order to claim it. 

• Voluntary registration: Restaurants that make less than £90,000 are free to voluntarily register. This could be helpful if the company has large VAT-bearing expenses, such marketing services, kitchen equipment, fit-outs, or delivery platform fees. 

• Ingredients and stock: Standard-rated goods, such as alcohol, soft drinks, and candy, are eligible for VAT reimbursement. There is no VAT to recover on several common food items because they are zero-rated. 

• Common reclaimable costs: When VAT is applied to commercial cooking equipment, cleaning, repairs, packing, utilities, accounting software, marketing, professional services, and delivery platform commissions, restaurants are generally able to recover the VAT. 

Example: A commercial oven is purchased by a VAT-registered restaurant for £6,000 + £1,200 VAT. The restaurant can often recover the £1,200 VAT through its VAT Return if it is utilised only for the restaurant business and it has a valid VAT invoice. 

Getting VAT right, and when to get help 

Calculating VAT for restaurants can be complicated particularly when there are a number of things involved, such as dine-in food sales, cold takeaway food, delivery-app orders, service charges, drinks packages and private events. But if you have the appropriate records and settings you can charge the right rate, recover eligible VAT, and file accurate MTD VAT returns. 

Restaurants can more confidently handle VAT with the help of E2E accounting. Our staff will provide helpful assistance specific to your restaurant business, from examining VAT rates and configuring EPOS codes to balancing delivery-platform payouts, creating MTD-compatible VAT reports, and addressing VAT concerns. 

Need help with restaurant VAT? Contact E2E Accounting to keep your VAT records accurate, reduce avoidable errors, and stay compliant as your business grows.

FAQs: Frequently Asked Questions

Conclusion

Rather than waiting until the end of the quarter, restaurant VAT functions best when it is integrated into daily operations. Managers should examine delivery-platform statements, employees should be able to process takeaway and eat-in orders, and restaurant owners should keep an eye on the VAT registration level as sales increase.

Minor configuration choices can have a big impact. You can get a trustworthy picture of sales, expenses, and VAT due with clear menu pricing, accurate EPOS categories, well-organised supplier invoices, and frequent reconciliations. Additionally, they facilitate the identification of overlooked VAT claims or improper VAT treatment before filing a return. This is exactly where specialist restaurant accountants add value, spotting these issues early rather than at the end of a VAT quarter.

If you want to know more about accounting for restaurants more broadly, check out our restaurant accounting guide.