Pricing Zero Rated Items

[DrowningInVAT]

Hi there. I own a small cafe business and I have a VAT question. In some cases, e.g. with cakes, I can mark in my books as standard-rated to eat in, and zero-rated to takeaway. In order to do this, do I need to change the customer price to reflect the change in VAT rating? Like for example Pret a Manger? Or can I have the same price and just pay VAT on one and not the other? Thank you so much in advance.

[spidersong]

The price you can charge is whatever the customer will take, so if you can charge £5 to take away and £5 to eat in then charge £5 and make more profit on the takeaway stuff.

There's nothing in VAT law that dictates how much you charge to your customers (apart from some anti-avoidance stuff on large transactions with related parties - not really relevant here!) all VAT law says is that you pay VAT out of the consideration you receive, so charge £6 pay £1.

I've also never come across anything in commercial law or trading standard regs that force you to charge different prices either, the only things they say is that when selling to the public you should advertise the price they'll pay, rather than or as well as an ex-VAT price if you want to display that (wholesaler. builders merchants etc sometimes do this), but they don't say you have to show the ex-VAT price anywhere.

So the only downside may be that a tax-savvy customer will spot this and query it, and form a negative view, but then again I've never been to a counter in Starbucks etc. where they show different eat-in and takeaway prices these days (although our local chippy used to decades ago), also you'll note that McDonalds ask if you're eat in or takeaway but don't change the price of your milkshake or any salads depending on the answer.

[DrowningInVAT]

Thank you very much for your detailed reply. Really appreciate it.