Money Helpdesk: Will I avoid VAT by eating salads in restaurants?

Susanne Simpson, tax expert at PricewaterhouseCoopers Edinburgh, writes:

In short, no. Choosing a cold salad in a restaurant may save your waistline but will not save you VAT.

The reason for this is that when you go into a cafe or restaurant for a meal, what you are buying for VAT purposes in the restaurant is not the same as what you buy in a food shop. What you buy in a cafe/restaurant is a supply of catering services, and not a supply of food.

The price you pay for the catering services in the restaurant will have VAT added to it at 20 per cent. By comparison, when you buy a loaf of bread from the supermarket you are buying food rather than a service, and that food does not attract VAT.

Similarly, with takeaway food, the general rule is if it is cold then no VAT but hot food is subject to the tax. In some cases, though, the answer is not so clear cut and the line between a supply of catering services (subject to VAT) and a supply of food (no VAT) is a fine one.

For example, if you buy a cold bridie or sausage roll from a baker's shop you will be buying food and so will not pay VAT. If that bridie or roll is hot because it has come straight out of the oven having been baked minutes/seconds before you buy it, the same will apply, ie no VAT.

However, if you buy the same item from the baker and the baker has deliberately kept it hot for you after it has come out of the oven, or has heated it for you from being cold, you will be buying the baker's catering services rather than the food for VAT purposes. As such, you will pay VAT at 20 per cent on top of the price of the hot food, whereas you would have paid no VAT had you bought the food cold.

So, to answer the question, if you order a cold salad or a cold drink as part of your meal in a restaurant then you do pay VAT.