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VAT calculation warning ahead of government's Eat Out to Help Out launch

31 July 2020 by
VAT calculation warning ahead of government's Eat Out to Help Out launch

Operators have been warned to ensure they have the correct systems in place ahead of the launch of the government's Eat Out to Help Out scheme on Monday.

Accountant Ruth Corkin, a director at Hillier Hopkins LLP, is a consultee on HMRC's Eat Out to Help Out stakeholder panel, and says businesses need to be aware of how VAT will be calculated on meals sold through the scheme.

The Eat Out to Help Out offer will be treated as ‘third-party consideration', which means the business will be liable to pay VAT on the whole charge of the meal. This could give rise to complications as most till systems will be set up to process discounts funded by the operator, where VAT would only be charged on the amount appearing on the customer's bill.

Corkin said the way the system works means restaurants would ultimately be more likely to overpay than underpay their VAT bill, but that if they were to underpay they could be subject to financial penalties.

She added that having systems in place to accurately record transactions made around the scheme will help when making claims for the payment of the discounted amounts.

Corkin told The Caterer: "The scheme is quite complex from a VAT perspective, but HMRC wants the administration and policing of it to be as simple as possible. One way restaurants can help themselves with this is to ensure that they have a simple yet accurate way of capturing the number of people dining per bill, as this would form part of the due diligence that HMRC would perform on claims.

"If your till system cannot capture this information, you may want to think of a way that staff can identify the number of heads for the claim without the need to have a complicated process. For example, if the front of house staff jot down the number of diners per table or you identify the number of heads per the number of main courses ordered. HMRC is not expecting the restaurants to police the scheme, but will take action against anyone suspected of abusing it, so record keeping is key."

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