VAT for Irish restaurants and cafes: rates, returns and the traps

VAT in an Irish food business means working out which rate applies to each thing you sell, charging it, collecting it, and passing it to Revenue less the VAT you paid on your own purchases. The rate depends on what you supply and how: food served in a restaurant, hot takeaway food, cold takeaway food, soft drinks and alcohol do not all take the same rate, and the rate on restaurant food has changed more than once in recent years. Check the number you charge on Revenue's site, not from memory, and confirm it with your accountant.

When do you have to register for VAT?

You must register once your turnover passes the registration threshold, and you can register earlier if it makes sense. Thresholds differ for businesses that supply goods and businesses that supply services, and a restaurant's mixed supply sits in a corner of the rules that your accountant should settle once, in writing. The numbers move, so read them on Revenue's website.

Registering voluntarily lets you reclaim VAT on a fit-out, equipment and stock before you are over the threshold, which can matter in the first year. The price is that you must charge VAT from the day you register.

Which rate applies to what?

Think about it as a question about each line on the menu.

• Food and non-alcoholic drink served for consumption on the premises is a restaurant and catering service, with its own rate.
• Hot takeaway food is treated differently from the same food eaten in.
• Cold takeaway items such as a packed sandwich can be a different rate again.
• Alcohol, soft drinks and some other items commonly take the standard rate.
• Delivery charges have their own treatment.

Do not carry one rate in your head and apply it to everything. A table with a coffee, a sandwich eaten in, a sandwich to take away and a bottle of wine has four rates in it, and a till that gets this wrong gets every return wrong.

Rates change in the annual Budget and sometimes in between. When a rate changes, you decide whether to keep the menu price and earn less per sale, or change the price and keep what you earn. Neither is wrong, but you must choose on purpose and update the till, the printed menu, the website and your delivery menus on the same day.

How does a VAT return work?

You normally file a return every two months, in which you declare the VAT you charged on your sales and the VAT you paid on your purchases, and pay or reclaim the difference. Keep an invoice for every purchase you reclaim, because Revenue can ask for it. Some small businesses can account on the cash receipts basis, which means paying VAT when you are paid; ask your accountant if that fits.

What cannot be reclaimed catches people out. Typical examples include some entertainment spending and certain motor expenses. The rules are on Revenue's website, and a good bookkeeper will keep the categories separate from the start.

What does Mosey do about VAT?

Mosey helps you see your sales by VAT rate. It does not file anything.

• A VAT summary in the dashboard. In Analytics, the VAT summary groups your sales by rate (gross, VAT and net) over your local days, from the till and from online orders, with refunds netted. It shows the figure for VAT on sales (T1 on the return). It cannot show T2, VAT on purchases, because Mosey cannot see what you buy. You can download it as a file or a PDF, and it says on every format that it is a helper, not a return.
• Sales with no split are listed separately. Mosey Pay payments, vouchers, tickets and catering are shown as "not itemised" rather than guessed. A sale with no rate stays in a "no rate set" row and is never given one.
• Rate changes are proposals that you confirm. When a rate is due to change, Mosey reminds you, and applies a change only after you confirm it. You choose whether to keep the shelf price or keep what the place earns, and a dish with its own rate is left alone.
• Refunds are netted in the period of the order. Mosey does not record the refund date separately, and the summary says so.

Check the summary against a real return with your accountant before you rely on it. It cannot replace your bookkeeping.

How do you keep the numbers clean day to day?

Make the rate part of the dish record, not a thing the cook remembers. Every item on the menu carries its rate in the till, and every extra (a side, a sauce, a modifier) follows the rate of the dish it belongs to. Once a month, print the sales by rate and ask whether the split looks right: if drinks suddenly look like 80% of sales, something is mis-set. Keep the monthly printout with the return, because it is the first thing you will want if Revenue asks a question.

What mistakes cost the most?

1. Wrong rate on a dish. One mis-set item sold a thousand times is a thousand wrong sales.
2. Not updating after a rate change. Menu, till, website and delivery menus all need the date.
3. No invoice for a reclaimed purchase. The reclaim can be disallowed.
4. Mixing personal and business spending on the same card.
5. Treating tips as sales. Tips are not part of the sale; they are for staff.

For the rest of the money picture, read the food cost guide, the cash flow guide and the payroll basics. To check what Mosey itself costs, see pricing.