Must a bed-and-breakfast ( B&B) include VAT on the cost of their meals?
26 May 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
have a client who operates a B&B (bed and breakfast). Fees are structured
on a Bed & Breakfast or Bed only basis, all VAT inclusive. The VAT is shown
separately on the invoice. Sometimes a guest will order an extra breakfast,
which is also charged at a rate inclusive of VAT.
tour operator complained that the breakfast should be excluding VAT. The tour
operator deducted the VAT from their payment transfer with a comment, I quote:
"it is unethical and against Industry Standards to charge VAT on any meals
what the VAT law is for charging VAT on meals such as a breakfast. If someone
orders a glass of milk only, where milk is subject to VAT at the zero rate, how
would the B&B owner charge for this glass of milk? What about any other
zero rated food item served with or for breakfast. As far as I understand the
entire breakfast buffet is VAT-able, irrespective if some items in the buffet
are VAT at 14% or VAT at zero rate, such as fresh Fruit & Vegetables.
tour operator who deducted the VAT from their payment was not correct.
The principle is that any supply by a vendor, made in the course of its
enterprise, is a taxable supply. From the facts the supply is not an
exempt supply and we don’t deal with that.
Even where the
supply qualifies for the rate of zero per cent, the supply is still a taxable
supply. The tax is then charged at 0%.
With respect to
milk the rate of zero per cent doesn’t apply – see section 11(1)(j) of the
Value-Added Tax Act and Part B of Schedule 2 to the Act. Paragraph 2 of
the Schedule provides that the rate of zero per cent does not apply where any
goods mentioned in paragraph 1 of the schedule are supplied in the course of
carrying out any agreement for the furnishing or serving of any meal,
refreshment, cooked or prepared food or any drink, as the case may be, so as to
be ready for immediate consumption when so supplied. Milk appears in item
15 of paragraph 1.
agree with your understanding of the issue.
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