With restaurants now offering 50% off the bill for August, we wanted to clear any confusion around VAT and the Eat Out to Help Out scheme.
For the scheme, VAT is due on the full bill to be paid by the customer and is due on the discounted amount. It is included before the discount has been applied.
According to VATSC05830
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained from the customer or a third party, including subsidies directly linked to the price of supply.
VAT will need to be paid in full within the correct period from the time when the transaction has taken place, and not when the refund for the scheme will be paid.
It is worth noting, you will be allowed to make manual adjustments to your records where you need to reflect the VAT due, so long as your point of sale system would not otherwise allow you to reflect the VAT due accurately.
A VAT example for a meal for two people:
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 as it is all for food and non-alcoholic beverages)
VAT due = 1/21 of £20 = 0.95p (1/21 is the VAT fraction to extract 5% VAT from a VAT inclusive price)
Remember that the temporarily reduced rate doesn’t apply to sales of alcohol and neither does the Eat Out to Help Scheme.
A VAT example for a meal for two people, including alcohol:
Food cost – £15
Alcoholic beverages – £5
Total bill – £20
Total paid by customer = £12.50
Total paid by scheme = £7.50 (50% of the bill excluding alcohol)
VAT due on food = 1/21 of £15 = £0.71
VAT due on alcohol = 1/6 of £5 = £0.83
Total VAT due = £1.54
HMRC have indicated that within the Eat Out to Help Out scheme, they will accept estimated returns should you be unable to calculate the adjustment in the correct period. This will allow you to correct the VAT on your next return.
So many schemes have appeared over the course of the pandemic, and it’s no wonder there are some who have sought further guidance on how they work. Our team have become experts in dealing with coronavirus support schemes, so if you are a restaurant looking for more information about how Eat Out to Help Out works, just get in touch!