VAT on a small coffee shop/cafe

[nt1986]

I'd love some insight from small coffee shop/cafe/tearoom owners about VAT registration. If you have had to do it? How you distinguish between the different amounts owed for the food/drink / takeaway etc? How you can afford to become a VAT registered business? As far as I see it, cant up the menu prices as customers won't pay the increased amounts so how are you expected to cover a VAT bill and still survive ?

 

[STDFR33]

All eat in is VATable. So start there.

If you’re over the threshold on your eat in custom, then your prices need to be set at a price where you are making a profit … if that can’t be done, you’re running an expensive, stressful hobby.

The problem is that cafes main goods bought for resale are zero rated but they have to charge VAT on the majority of their sales.

As a rule of thumb in catering, it’s VATable unless it isn’t … cold sandwich taken away etc.

 

[nt1986]

All eat in is VATable. So start there.

If you’re over the threshold on your eat in custom, then your prices need to be set at a price where you are making a profit … if that can’t be done, you’re running an expensive, stressful hobby.

The problem is that cafes main goods bought for resale are zero rated but they have to charge VAT on the majority of their sales.

As a rule of thumb in catering, it’s VATable unless it isn’t … cold sandwich taken away etc.

Thank you. Just seems such a lot of money to have to "give away" effectively! Not sure how smaller businesses are expected to cope.

 

[nt1986]

Are there any such businesses that still run on paper ordering pads and a bog standard till? Do you put your cold takeaway sales through separately on your till.. if you can?

 

[WaveJumper]

You are not"giving it away" you are collecting it on behalf of the HMRC and then passing it on its not yours. If your VAT registered then you can claim back the VAT on the goods you buy and offset this against what you owe HMRC however generally you are always going to "owe" HMRC something.

Sometimes its best to keep this to one side ie spending it and then not being able meet you VAT bill.

This is the old issue of new business thinking they are "better value" than a competitor and not planning for the day they hit the VAT threshold and the impact this is going to have on their own costs.

Register for VAT

How to register for VAT, change your details, cancel your registration, register for VAT in EU countries.

www.gov.uk

 

[nt1986]

You are not"giving it away" you are collecting it on behalf of the HMRC and then passing it on its not yours. If your VAT registered then you can claim back the VAT on the goods you buy and offset this against what you owe HMRC however generally you are always going to "owe" HMRC something.

Sometimes its best to keep this to one side ie spending it and then not being able meet you VAT bill.

This is the old issue of new business thinking they are "better value" than a competitor and not planning for the day they hit the VAT threshold and the impact this is going to have on their own costs.

Register for VAT

How to register for VAT, change your details, cancel your registration, register for VAT in EU countries.

www.gov.uk

Thanks. Giving away was for want if a better phrase as that's what it feels like!! Totally get your last comment, never expected to get to the threshold, which is obviously good in a way but not in others!

 

[UK Contractor Accountant]

Look at the VAT Flat Rate Scheme - you only pay vat at a fixed rate of your takings.

Current rate 8.5% you also get 1% reduction in first year of vat registration. Note rate currently set to go up o. 1Aoril 22.

 

[nt1986]

Look at the VAT Flat Rate Scheme - you only pay vat at a fixed rate of your takings.

Current rate 8.5% you also get 1% reduction in first year of vat registration. Note rate currently set to go up o. 1Aoril 22.

Thank you. Will do

 

[DontAsk]

Are you close to the threshold? Do you need to register? Could you reduce your hours, reduce turnover, so no need to register and still make an acceptable profit?

Are your supplies subject to VAT? Don't forget that will be offset against what you collect.

 

[nt1986]

Are you close to the threshold? Do you need to register? Could you reduce your hours, reduce turnover, so no need to register and still make an acceptable profit?

Are your supplies subject to VAT? Don't forget that will be offset against what you collect.

Yes will be within the next week. Where our premises is we arent "allowed" to reduce hours, we initially had Mondays closed but the landlord has said we have to open 7 days. We get a few supplies from a cash and carry but majority is from supermarkets so as i understand it, not a lot will be subject to VAT.

 

[Mark T Jones]

Thank you. Just seems such a lot of money to have to "give away" effectively! Not sure how smaller businesses are expected to cope.

You are on a level playing field with other operators.

In a nutshell, your options revolve around either driving volume so the margins make sense or catering to a quality niche where you can increase margins. (or potentially staying below the threshold)

Such is the way of business!

 

[KevB]

Hi Can someone explain the fixed rate VAT scheme ,
We supply coffee shops as well as running one. I understand some of our customers have negotiated a fixed rate on their vat some as low as 6% . How do you go about becoming fixed rate as far as vat liability.
Thanks

 

[STDFR33]

Hi Can someone explain the fixed rate VAT scheme ,
We supply coffee shops as well as running one. I understand some of our customers have negotiated a fixed rate on their vat some as low as 6% . How do you go about becoming fixed rate as far as vat liability.
Thanks

VAT Flat Rate Scheme

Flat Rate VAT scheme - eligibility, thresholds, flat rates of VAT and joining or leaving the scheme.

www.gov.uk

 

[Newchodge]

Yes will be within the next week. Where our premises is we arent "allowed" to reduce hours, we initially had Mondays closed but the landlord has said we have to open 7 days. We get a few supplies from a cash and carry but majority is from supermarkets so as i understand it, not a lot will be subject to VAT.

Everything you buy froma supermarket that is VATable has VAT on it. You have to go to the customer service desk with your receipt and ask for a VAT receipt. Raw food does not have VAT