VAT on food and soft drinks: the short answer
Most food for human consumption is zero-rated for VAT. However, four product categories are always standard-rated at 20%, even when served cold and taken away: confectionery, crisps and savoury snacks, soft drinks, and alcohol. Ice cream is also standard-rated. Anything consumed on the supplier's premises is standard-rated regardless of product type. Use the food and drink VAT checker to confirm the rate for any single item on your menu.
This article is about product classification: which items on a hospitality menu sit in which VAT category, and why. The related question of temperature (hot vs cold) and where the customer eats is covered in detail in VAT on takeaway food. The two posts work together: classify your product here, then apply the temperature and premises rules there.
The default: most food for human consumption is zero-rated
Under VAT Notice 701/14, food supplied for human consumption is zero-rated as a starting point. This covers most of what a cafe, restaurant, pub or caterer would recognise as food: bread, sandwiches, salads, savoury pastries (cold), fruit, vegetables, plain biscuits, cakes, meat and fish products sold cold for consumption off the premises.
The zero-rating is not absolute. It has four standing carve-outs that apply regardless of temperature, context or how the product is sold. Understanding those carve-outs is the practical skill for any operator managing a mixed menu.
The four standing carve-outs: always standard-rated at 20%
Even when food or drink is cold, purchased to take away and never consumed on the premises, the following four categories are standard-rated at 20% under VAT Notice 701/14: confectionery (including chocolates, sweets and chocolate-covered biscuits); crisps and savoury snacks (potato crisps, puffed cereals and roasted or salted nuts when packaged and ready to eat); soft drinks (carbonated beverages, fruit cordials and squashes); and alcohol. Ice cream is also standard-rated. There are no exceptions based on portion size, packaging or whether the item is sold alongside zero-rated food.
| Category | VAT rate | Examples | Authority |
|---|---|---|---|
| Confectionery | 20% | Chocolates, sweets, chocolate-covered biscuits, cereal bars with chocolate | VAT Notice 701/14 |
| Crisps and savoury snacks | 20% | Potato crisps, puffed cereals, roasted or salted nuts (packaged, ready to eat) | VAT Notice 701/14 |
| Soft drinks | 20% | Carbonated drinks, fruit cordials, squashes, bottled water | VAT Notice 701/14 |
| Alcohol | 20% | All alcoholic drinks in any context, any ABV above 1.2% | VAT Notice 701/14 |
| Ice cream | 20% | Ice cream, sorbet, lollies, frozen desserts | VAT Notice 701/14 |
The single most common missed classification in hospitality is soft drinks. An operator who sets their EPOS to zero-rate all cold takeaway items will under-declare VAT on every can of cola, every bottle of juice and every squash sold at their counter. Soft drinks are not "food that happens to be cold"; they are a permanent carve-out from zero-rating.
Soft drinks in detail: what is and is not a soft drink for VAT purposes
For VAT purposes, soft drinks include carbonated drinks, fruit cordials and squashes. These are standard-rated at 20% under VAT Notice 701/14 regardless of temperature, serving format or whether the customer takes them away. Bottled water is also standard-rated.
The plain-milk and unflavoured-dairy exception
Plain unflavoured milk is not a soft drink and may be zero-rated. This exception covers cow's milk and, in some circumstances, unflavoured plant-based milks used as a direct milk substitute. However, flavoured milks, milkshakes and dairy-based drinks with added sugar, flavouring or other ingredients can fall within the soft-drinks carve-out depending on their composition. The line between zero-rated plain milk and a standard-rated soft drink is a borderline classification that depends on the specific product. For any flavoured or sweetened dairy drink, check VAT Notice 701/14 directly or use the food and drink VAT checker rather than asserting a rate from general principles.
Bottled water
Bottled water, including still, sparkling and mineral water, is standard-rated at 20%. Tap water provided free as part of a hospitality service is not a taxable supply in the same sense, but any bottled water sold as a product at the counter or from a fridge is standard-rated. This catches a number of cafes and sandwich bars that zero-rate their cold fridge items indiscriminately.
Fruit juice and cold-pressed drinks
Fruit juices and cold-pressed drinks are generally treated as soft drinks and are standard-rated. If you produce your own freshly squeezed juice on the premises and sell it without added sugar or other ingredients, the classification can be less clear. This is another borderline area covered in VAT Notice 701/14; do not assume zero-rating without checking the Notice or running the product through the food and drink VAT checker.
The eat-in override: premises make any item standard-rated
Even a zero-rated food item becomes standard-rated the moment a customer consumes it on the supplier's premises. Under VAT Notice 709/1, anything consumed on the premises is catering and standard-rated at 20%. A cold sandwich sold to take away is zero-rated; the identical sandwich eaten at a table in your cafe is standard-rated. The four carve-outs above are standard-rated in all circumstances, including on-premises consumption.
The eat-in rule and the product carve-outs are independent. Soft drinks are standard-rated both because they are a carve-out and because they would be standard-rated when consumed on the premises. A cold sandwich is only standard-rated when consumed on the premises, but would otherwise be zero-rated. Understanding which rule is doing the work matters when you are configuring your till.
For the full logic of hot vs cold, eat-in vs takeaway and how the premises rule interacts with the five hot-food tests, see VAT on takeaway food.
Product-VAT reference table
The table below applies the product rules to the items most commonly queried by hospitality operators. The "deciding test" column shows which rule determines the rate. Use the food and drink VAT checker for your specific products.
| Item | VAT rate (cold, taken away) | VAT rate (eat-in) | Deciding test |
|---|---|---|---|
| Cold sandwich or salad (takeaway, no seating) | 0% (zero-rated food) | 20% (catering, on-premises) | HP 1 (zero-rated food default); HP 2 (eat-in override) |
| Hot takeaway food (chips, burger, wrap) | 20% (hot-food tests) | 20% | HP 1 (hot-food tests) |
| Confectionery: chocolate, sweets, chocolate-covered biscuits | 20% (carve-out) | 20% | HP 3 (confectionery carve-out) |
| Crisps and salted / roasted nuts (packaged) | 20% (carve-out) | 20% | HP 3 (crisps and savoury snacks carve-out) |
| Soft drink: cola, lemonade, carbonated drink | 20% (carve-out) | 20% | HP 3 (soft drinks carve-out) |
| Fruit cordial or squash | 20% (carve-out) | 20% | HP 3 (soft drinks carve-out) |
| Bottled water (still or sparkling) | 20% (carve-out) | 20% | HP 3 (soft drinks carve-out) |
| Plain milk / unflavoured dairy | May be 0% (check VAT Notice 701/14) | 20% (eat-in) | Borderline: check Notice 701/14 or use checker |
| Ice cream, sorbet, lollies | 20% (standard-rated) | 20% | HP 3 (ice cream standard-rated) |
| Alcohol (beer, wine, spirits, any ABV above 1.2%) | 20% (carve-out) | 20% | HP 3 (alcohol always standard-rated) |
| Plain biscuits (no chocolate coating) | 0% (zero-rated food) | 20% (eat-in) | HP 3 (zero-rated default; not confectionery) |
| Bread, rolls, plain cakes | 0% (zero-rated food) | 20% (eat-in) | HP 3 (zero-rated food default) |
Mixed and linked supplies: meal deals, hampers and bundled pricing
When a business sells a bundle containing both zero-rated and standard-rated items (for example, a meal deal combining a zero-rated sandwich with a standard-rated soft drink), the supply is a mixed supply and the VAT liability must be apportioned between the two elements. The apportionment must reflect the actual values of the zero-rated and standard-rated components; a blanket single rate applied to the deal price is not correct.
The principle is that each element of a mixed supply retains its own VAT status. A sandwich-and-cola deal does not become zero-rated because the sandwich is zero-rated; the cola element remains standard-rated. Equally, the deal does not become entirely standard-rated; the sandwich element remains zero-rated. The business must hold a defensible apportionment method and apply it consistently.
Linked supplies (where a business sells a main item and a connected item at a combined price, such as a hotel package with included meals) can be more complex, depending on whether the transaction is a single composite supply or two separate supplies. The detailed mechanics of apportionment and the composite-vs-separate-supply analysis are not straightforward. If your business operates bundled pricing for food and drink, this is an area to review with a specialist. See our VAT returns and schemes service for support with supply-type analysis and return preparation.
What a misclassified drinks list costs on a VAT return
The practical cost of misclassifying soft drinks, confectionery or ice cream as zero-rated is direct: output VAT understated on every return for the period the error ran. If a cafe sells 200 bottles of water and 150 cans of soft drink per week at £2.50 each, misclassifying those as zero-rated understates output VAT by £58.33 per week (£2.50 x 350 x 1/6), or around £3,000 per year.
HMRC has the power to assess for errors going back four years. On a business turning over £300,000 per year with 30% of revenue from drinks misclassified as zero-rated, a retrospective assessment could amount to a material sum before penalties and interest. Getting the product classification right at the point of EPOS configuration is far cheaper than correcting it after a VAT inspection.
If you are approaching the £90,000 rolling 12-month threshold for VAT registration, note that zero-rated food sales still count as taxable supplies toward the threshold. A business selling mainly zero-rated food can still be required to register and must monitor its turnover on a rolling 12-month basis, not just at year-end.
Check your menu with the VAT rate checker
The food and drink VAT checker walks through the product classification questions item by item. It covers the four carve-outs, the eat-in override and the hot-food tests in a single flow, and gives a reasoned rate verdict for each product. Use it to work through your full menu before configuring your EPOS, or to check an item you are unsure about before it goes on the menu.
For businesses with a more complex picture (FRS sector-rate decisions, return preparation across mixed-rate menus, or a VAT inspection in progress), our VAT returns and schemes service provides specialist support. Operators running wet-led businesses can find relevant context at pubs and bars. Cafe and coffee-shop operators managing a mixed drinks and food menu will find more at cafes and coffee shops. For takeaway-focused operators, takeaways covers the operational and compliance context specific to that trade.