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Hospitality accounts and VAT

Year-end accounts, corporation tax, VAT returns and bookkeeping, with your till's daily sales posted into Xero by VAT rate.

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The VAT on a café receipt

The same sandwich carries 20% VAT at a table and none to take away. A drink, a hot roll and a service charge each follow their own rule.

We map each button on your till to its VAT rate when we set it up. The VAT return is then built from the same lines the till prints, and the eat-in and takeaway VAT calculator shows the VAT on a week of mixed sales.

VAT on each line
  • Flat white, drunk at a table20%
  • Bacon roll to take awayHot: above the air temperature when handed over20%
  • Cheese sandwich to take awayCold takeaway food0%
  • Cheese sandwich, eaten at a tableConsumed on the premises20%
  • Crisps to take awayAlways standard-rated20%
  • Bottled water to take awayAlways standard-rated20%
  • Service charge, compulsoryPart of the price of the meal20%
  • Service charge, optionalThe customer is free to refuse itOutside VAT

VAT Notice 709/1, sections 3 and 4, and HMRC guidance E24 on service charges

From the till to Xero

Accounts, tax, bookkeeping and VAT returns start from £149 + VAT a month, set by your turnover.

The till's daily summary

Your EPOS system produces a daily sales summary.

Posted to Xero each day

Split by VAT rate and by payment type: cash, card and app.

Card settlements matched

Card settlements match the bank line by line.

Cash counted

The cash is counted against the till.

Year-end accounts and corporation tax

We prepare the year-end accounts and the corporation tax return, with gross profit on food and on drink shown separately. For the year from 1 April 2026 corporation tax is 19% on profits under £50,000 and 25% on profits over £250,000, with marginal relief between.

Capital allowances on a fit-out

The Annual Investment Allowance covers up to £1 million of plant and machinery a year. A company can claim full expensing at 100% on new and unused main-rate plant, and 50% on special-rate assets such as integral features. Cars are excluded from both.

From 1 January 2026 a 40% first-year allowance on new main-rate plant is open to all businesses, including sole traders and partnerships. The main writing down allowance fell to 14% from April 2026. The Budget on 28 October 2026 proposed raising the first-year allowance to 50% from 1 January 2027 and cutting the writing down allowance to 12% from April 2027. Those changes are not yet law.

VAT registration and the Flat Rate Scheme

You register when taxable turnover over the last 12 months goes above £90,000, or when you expect it to go above £90,000 in the next 30 days alone. Registration is due within 30 days of the end of the month in which you passed the threshold.

HMRC's flat rate percentages are 12.5% for catering services including restaurants and takeaways, 10.5% for hotel or accommodation and 6.5% for pubs. Check the limited cost trader test before joining.

Questions about accounts and VAT

What corporation tax rate does a hospitality company pay?

For the year from 1 April 2026, 19% on profits under £50,000 and 25% on profits over £250,000, with marginal relief between the two.

Can we claim the cost of a new kitchen in one year?

In most cases, yes. The Annual Investment Allowance covers up to £1 million of plant and machinery a year. A company can also claim full expensing on new and unused main-rate plant, at 100%, and 50% on special-rate assets such as integral features.

Which flat rate percentage applies to a restaurant?

HMRC's flat rate percentage for catering services, including restaurants and takeaways, is 12.5% of VAT-inclusive turnover. Pubs use 6.5% and hotel or accommodation 10.5%. Check the limited cost trader test and the turnover limits before joining.

Business Debt Recovery tools and guides

Business Debt Recovery is a trading style of Buzz Legal Ltd (company 17078192). Court work is handled by AD Solicitors, authorised and regulated by the SRA (no. 8011228).

Book a free review of your accounts and VAT

Send us your last accounts and a recent VAT return. We will check the VAT on your till and show you what we would change.