If food is not subject to VAT it is zero rated, not exempt.
Anything consumed on the premises is subject to VAT regardless of the temperature of the food.
Cold food consumed off the premises will be subject to VAT if it is supplied in the course of catering – this can be a grey area particularly in the world of food delivered to offices. A Pret box of sandwiches is zero rated but if the same sandwiches are supplied on a platter with garnish etc they could be subject to VAT.
Not all cold food consumed off the premises is zero rated – crisps etc, confectionery and beverages are all subject to VAT.
Whether the food is cooked is irrelevant (the bread in a sandwich has been cooked), the test is whether the food is supplied at a temperature above the ambient temperature unless the heat is residual from the cooking process – best example is a pie:
- A pie is not edible without being cooked
- If a pie is sold off the cooling tray but is still hot it will be zero rated (if consumed off the premises etc)
- If the same pie, having gone cold, is heated in a microwave it will be standard rated.
Why does it matter whether it is zero rated or exempt? If a business makes zero rated supplies it can recover all the VAT it pays to its suppliers, if it makes exempt supplies it cannot.
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