The Eat Out To Help Out Scheme And VAT

Many businesses are signing up to the Eat Out to Help Out scheme announced by the Government recently, but how does it work with VAT? This was a question I was asked recently asked by a client ...

If you are a coffee shop, restaurant or other outlet that serves food, you'll know that once you've signed up for the scheme, you can offer diners up to 50% off their food and non-alcoholic drinks bill, up to a maximum of £10 per person on a Monday, Tuesday or Wednesday, thoughout August 2020.

"This is a fantastic idea from the Government!"

But I did have an enquiry from a client who runs a small restaurant recently. They'd registered for the Eat Out to Help Out scheme, but were wondering if they only pay VAT on the newly discounted amount?

HMRC has confirmed that VAT will still be due on the total value of the bill before the discount is applied. This is because although the customer is only paying part of the bill themselves, the restaurant is still receiving full consideration for the supply of the food and non-alcoholic beverages.

This also means that you have to pay the full amount of VAT owed to HMRC in the period the sale was made and not when the refund for the Eat Out to Help Out scheme is paid. You can make a manual adjustment to your records to reflect the VAT due if your POS system doesn't allow you to show the VAT correctly.

To give you an example:

- Food cost – £15
- Non-alcoholic beverages – £5
- Total bill – £20
- Total paid by customer = £10
- Total paid by scheme = £10 (50% of the total bill)
- VAT due = 5% of £20 = 0.95p

Remember, alcohol isn't included in the Eat Out to Help Scheme.

HMRC has said in their guidance for the Eat Out to Help Out scheme that they will accept estimated returns if you can't calculate the adjustment when you submit your VAT return. You will then need to correct it on your next return.

I'll be talking about the 5% VAT rate for hospitality businesses on Thursday.

If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.