A small business owner who failed to pay the correct amount of VAT for more than five years has been banned from running further companies, a report has revealed.
The Insolvency Service said the fish and chip shop, based in Wales, had “not distinguished the difference between hot and cold food sales”.
According to the regulator, the restaurant was incorporated in 2007 and registered for VAT in 2008.
But an investigation, launched by HM Revenue & Customs (HMRC) in 2017, found that the business had failed to charge VAT on a significant number of VAT-chargeable items.
When analysing the shop’s sales records, the point-of-sale register revealed that the business had not declared that food was being served “hot” – meaning it had failed to declare around £2,000 of VAT a week between January 2012 and July 2017.
Under tax legislation, any food item that is being served to take away or to be consumed on the premises and is intended to be consumed “hot” – generally defined as anything above the ambient temperature – is subject to the standard rate of VAT.
Cold food, meanwhile, may be zero-rated for VAT purposes, but only if the product is taken away.
The report comes after the Government extended the temporary reduced rate of VAT of five per cent until 30 September 2021 to support the industries most affected by Covid-19.
The relief applies to almost all supplies of hospitality, hotel and holiday accommodation and products, including food and non-alcoholic beverages sold for on-premises consumption and hot takeaway food and non-alcoholic beverages.
The temporary rate was replaced by a new rate of 12.5 per cent from 01 October 2021 up until 31 March 2022.
To learn more about the treatment of hot and cold food for VAT purposes, please click here.
For help and advice with related matters, please get in touch with our VAT team today.
Latest posts by Accountants in London (see all)
- Is it time to scale up your start-up? - May 2, 2024
- Everything you need to know about Patent Box - May 2, 2024
- The most common VAT filing mistakes – and why MTD is the solution! - April 30, 2024