VAT on Coffee

Whether or not VAT is charged on coffee should be straightforward to answer, but, as with most VAT questions, the answer depends on a number of circumstances.

When is coffee zero-rated for VAT?

Coffee is treated as food for VAT purposes and is therefore zero-rated.

Examples of zero-rated coffee include:

• instant coffee
• ground coffee
• coffee beans
• coffee flavourings.

No VAT is charged on any of these items.

What about coffee that is sold and served?

Coffee purchased, as a hot drink, from a café, restaurant or similar establishment, is subject to VAT at the standard rate of 20%.

Whether the coffee is consumed on the premises or taken away does not affect the VAT treatment. In the same way, VAT is charged on hot coffee purchased from takeaways/street vendors.

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 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 Iced coffee which is taken away is zero-rated regardless of where purchased.

Coffee liqueurs

Coffee liqueurs are always subject to VAT, whether purchased 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.

Conclusion

Like many types of food and drink, the VAT treatment of coffee can seem simple at first glance, but become extremely complex once you factor into the multitude of ways it can be sold, supplied and served. We hope this guide has been helpful - if you require assistance with your VAT situation, contact the Shorts VAT team today.