--- title: "VAT on coffee: rates, ratings and exceptions" description: Understand the complex VAT rules on coffee, including varying rates for hot and cold beverages, and the impact of alcohol and business type. image: https://blog.shorts.uk.com/hubfs/coffee.jpg --- [![Shorts_logo_White](https://blog.shorts.uk.com/hubfs/New%20Site%202018/Shorts_logo_White.svg "Shorts_logo_White")](https://www.shorts.uk.com/) [Blogs & News](https://blog.shorts.uk.com/) > [VAT](https://blog.shorts.uk.com/topic/vat) # VAT on coffee: rates, ratings and exceptions Lynne Gill - 12 January 2026 ###### Select topic - Please Select - [ Audit ](https://blog.shorts.uk.com/topic/audit) [ Business Taxes ](https://blog.shorts.uk.com/topic/business-taxes) [ Radius – R&D Tax Relief & Patent Box ](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) [ Corporate Finance ](https://blog.shorts.uk.com/topic/corporate-finance) [ GENUS Management Accounts ](https://blog.shorts.uk.com/topic/genus-management-accounts) [ VAT ](https://blog.shorts.uk.com/topic/vat) [ Private Client ](https://blog.shorts.uk.com/topic/private-client) [ Payroll ](https://blog.shorts.uk.com/topic/payroll) [ EOT ](https://blog.shorts.uk.com/topic/eot) [ International Taxes ](https://blog.shorts.uk.com/topic/international-taxes) ![featured image](https://blog.shorts.uk.com/hubfs/coffee.jpg) Whether or not VAT is charged on coffee should be straightforward to answer, but, as with most VAT questions, the answer depends on how it is sold. ## Is coffee zero-rated for VAT? Coffee is treated as [food for VAT purposes](https://blog.shorts.uk.com/vat-on-food) and is therefore [zero-rated](https://blog.shorts.uk.com/exempt-from-vat-or-zero-rated-whats-the-difference) in most forms and instances. Zero rating applies to the following coffee products:  - instant coffee granules - ground coffee beans - coffee beans - coffee flavourings Because they are zero rated, no VAT is charged on any of these items. ### VAT on coffee sold by cafes/restaurants Whilst coffee products used to prepare coffee, for example, instant coffee or ground/whole beans are zero-rated, coffee purchased as a hot drink from a café, restaurant or similar establishment, is subject to [VAT](https://blog.shorts.uk.com/what-is-vat?hsLang=en-gb) at the **standard rate** of 20%. Whether the coffee is consumed on the premises or taken away does not affect the VAT treatment. The same approach applies to hot coffee purchased from takeaways/street vendors. ### Case Study: University of Southampton Student's Union The University of Southampton Students’ Union (USSU) tried to argue that the sales of hot coffee were exempt from VAT as the sales were closely related to the provision of exempt education. HMRC disagreed and USSU appealed to the First Tier Tribunal which, unfortunately for USSU, agreed with HMRC. The sale of hot coffee is standard rated. ### Possible exceptions However, small businesses selling hot drinks may not be VAT registered if the turnover of the business is below the [VAT registration threshold](https://shorts.uk.com/vat-consultancy-planning/vat-registration-in-the-uk/) and such businesses are not able to charge VAT. Iced coffee drunk in a café, restaurant or similar establishment is subject to VAT when the coffee is consumed on the premises. If the iced coffee is taken away it's treated as zero-rated, regardless of where purchased. ## VAT and coffee liqueurs Coffee liqueurs are always subject to VAT, whether bought in a bottle to be consumed later, purchased in a restaurant, pub or similar establishment for consumption on the premises, or taken away. In the same way, coffees with alcohol added to them, such as Irish coffee, are subject to VAT. ## Key takeaways - Like many types of food and drink, the VAT treatment of coffee can seem simple at first glance but becomes extremely complex once you factor in the multitude of ways it can be sold, supplied, and served. - The varying VAT rates depend on whether the coffee is in its unprepared form, such as beans or granules, or if it has been brewed and served as a hot or cold beverage. - This complexity is further compounded by the type of establishment selling the coffee, whether it's a café, restaurant, or takeaway vendor, and even extends to the presence of alcohol in coffee-based drinks. - A one-size-fits-all approach simply does not apply when it comes to VAT on coffee. If your business involves coffee, it is very important to stay informed of the latest rules and regulations surrounding VAT for coffee. We hope this guide has been helpful in shedding some light on these products. If you require specific assistance with your VAT situation, don’t hesitate to contact the Shorts VAT team today using the form below.     ![author](https://blog.shorts.uk.com/hubfs/ZT_cPBSU-1-1.jpeg) #### Lynne Gill My area of expertise is land and property transactions but I have extensive knowledge of both domestic and international VAT and I love complex VAT queries. I have an Honours degree in Business Studies and a VAT legal and technical qualification from the Institute of Indirect Taxation. [View my articles](https://blog.shorts.uk.com/author/lynne-gill) Tags: [VAT](https://blog.shorts.uk.com/topic/vat) Share this on - - - [Questions? Get in touch with us](https://www.shorts.uk.com/contact/) ###### Tax Saving Guide 2026-27 Written especially for entrepreneurs and owner-managed businesses, this guide is full of planning ideas and tax risks to avoid. 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