Vending is included in VAT reduction

After the Government announced VAT registered hospitality businesses would benefit from a temporary 5% reduced rate of VAT, the Automatic Vending Association (AVA) has now established that vending businesses are included.

The AVA confirmed that HMRC tax experts had indicated that catering, foodservice and out-of-home food and drink provision are all covered by the VAT reduction and that vending is included within the definition.

Full details are available in VAT Notice 709/1 ( Section 2.4 deals specifically with vending: 

“2.4 Vending machines 

Vending machine supplies follow the same general principles as food and drink supplied from catering outlets. In other words all: 

  • supplies of food and drink products that are standard-rated within the excepted items (see Food products (VAT Notice 701/14)) are also standard-rated when supplied from vending machines (for example, sales of beverages or confectionery) 
  • supplies of food and drink from vending machines in canteens and restaurant type areas are standard-rated (or temporarily reduced rated) as supplies to be consumed on the premises where they have been supplied, an apportionment will only be allowed if the food seller can produce evidence to show that a proportion of the items of cold food (that would be eligible for zero rating) are taken away from the canteen or restaurant premises (see paragraph 3.3) 
  • supplies of food and drink from machines sited in thoroughfares and areas not designated for the consumption of food follow the liability of the product sold (see Food products (VAT Notice 701/14))” 

The reduction in VAT covers hot drinks, soft drinks and food but not standard format ‘grocery items’ such as confectionery and snacks. 

AVA chief executive, David Llewellyn said: “As with all tax legislation, this has not been a straightforward exercise in getting answers from HM Treasury and HMRC. There is no expectation or legislation from Government that retail prices should be reduced. This is seen as an aid to struggling businesses. Applying different VAT rates across your business will take some accounting effort, but every little helps! As always, you should check the application of this reduction with your own accountants/advisors”.