Hospitality
Accountant for Restaurants, Cafés and Takeaways
Thin margins, heavy payroll and a VAT rule that changes with the temperature of the food. Hospitality punishes vague bookkeeping more than most trades.
A restaurant can be busy every night and still lose money, because the margin sits in gross profit percentages and staff cost ratios that move week to week. We set the reporting up so those numbers are visible while you can still act on them, rather than appearing in a set of accounts nine months after the year ended.
We act for independent restaurants, cafés, takeaways and food businesses across London, Finchley, Enfield and North London — including a good number of family-run businesses where the owner is also the head chef.
VAT on food handled
Hot, cold, eat-in, takeaway — the liability changes and so does the return.
Payroll and tips
PAYE, the National Living Wage, and the rules on distributing tips.
Weekly margin reporting
Gross profit and staff cost as a percentage, while you can still act on it.
Till and delivery reconciliation
EPOS, Deliveroo, Uber Eats and Just Eat tied back to the bank.
VAT on food is not one rate
Cold takeaway food is generally zero-rated. Hot takeaway food is standard-rated. Anything eaten on the premises is standard-rated whatever its temperature. A cold sandwich to take away and the same sandwich toasted are different VAT outcomes, and a business selling both needs a till that records the distinction — because HMRC will ask how the split was arrived at.
We make sure the point-of-sale setup produces a defensible split, and we look at whether a retail scheme would reduce the work without costing you money.
Tips, service charge and troncs
Employers must pass on tips to staff in full and cannot make deductions from them. How a tip is distributed determines the National Insurance position: amounts paid out through a properly independent tronc arrangement can avoid NIC, while tips run through the business payroll generally cannot. The arrangement has to be genuine — an employer who controls the allocation is not running a tronc, whatever it is called.
Cash, and why HMRC looks closely
Hospitality is one of the sectors HMRC treats as higher risk, and its enquiries typically start with whether recorded takings are credible against purchases, staffing and opening hours. The protection is ordinary and unglamorous: till readings kept, banking that matches, supplier invoices filed, and a gross margin that holds steady. We put that record together as we go, so an enquiry is a matter of handing over what already exists.
Fit-out, equipment and what you can claim
Fitting out a restaurant is usually the largest single spend a new operator makes, and how it is treated decides the tax bill for years.
Kitchen equipment, refrigeration, furniture and most loose fittings qualify for capital allowances, and the annual investment allowance means the whole cost can often be relieved in the year it is spent. Parts of the building itself do not — the structure, and general decorative work, sit outside. Integral features such as heating, air conditioning, and electrical and water systems have their own slower rate.
The difference between full relief now and relief spread over decades is decided by how the builder's invoice is broken down. Ask for it itemised while the work is happening, because reconstructing it from a single figure afterwards is guesswork that HMRC has no reason to accept.
Staff meals and wastage
Food eaten by staff and food thrown away both leave the same hole in the stock figures, and neither is a sale — but they are treated differently and both attract attention when the gross margin does not look right for the trade.
Free or subsidised meals provided to staff on the premises are generally not a taxable benefit where they are available to all employees on the same terms. Wastage is an ordinary cost of the trade. What causes trouble is neither being recorded, so the only visible explanation for the gap is unrecorded sales.
A wastage sheet and a note of staff meals take a minute a day and answer the question before it is asked.
Delivery platforms
For most restaurants and takeaways, delivery apps are now a large share of turnover and the single most common source of error in the accounts. The problem is not the platform — it is that the money arriving in the bank bears almost no relation to what was sold.
Record the sale, not the payout
The platform collects the full amount from the customer, deducts its commission, and pays you the remainder days later, often batched. If you record the payout as your sale, you have understated turnover by the commission and recorded no cost for it. Your gross margin then looks wrong, your VAT is wrong, and — the part that matters most — you may believe you are below the registration threshold when you are not.
The commission has its own VAT
Commission charged by the platform is a supply to you, and where it carries VAT that VAT is generally recoverable if you are registered. Netting the whole thing off means the input tax is never claimed. Over a year on a busy site that is a meaningful sum simply left behind.
HMRC can see the platform figures
Digital platforms report seller information, so the sales made through them are visible independently of what you declare. A cash business with a strong app presence is therefore in a different position from one a decade ago: the app half of the turnover is externally verifiable, and any mismatch is the obvious place to start an enquiry. The practical consequence is that the platform records have to be reconciled properly rather than approximated.
And check whether the delivery is profitable at all
Commission on delivery orders is substantial, and food costed for a dine-in margin can lose money once it is paid. Plenty of kitchens are busier and no better off. It is worth costing a few of your most-ordered dishes at the delivery price after commission before concluding that more orders is the same thing as more profit.
Frequently asked
Is takeaway food zero-rated for VAT?+
Cold takeaway food usually is. Hot food is standard-rated, and so is anything consumed on the premises. There are long-standing arguments about products that are warm because of how they are made rather than to be eaten hot, which is why the till split matters.
Can I keep the service charge?+
No. Employers are required to pass tips and service charge on to workers in full, and cannot deduct from them. There are rules about fairness and transparency in how they are allocated, and you need a written policy.
What gross profit percentage should I be running at?+
It varies by format — a wet-led site and a takeaway are not comparable — but the useful discipline is tracking your own figure weekly and knowing why it moved. A percentage that drifts down without an obvious cause is usually wastage, portion control or theft, and it shows up in the numbers long before anywhere else.
Do you handle payroll for shift staff?+
Yes, including variable hours, the different National Minimum Wage bands by age, holiday pay accrual for irregular hours, and auto-enrolment. Hospitality payroll is mostly a question of getting the hours in accurately and on time, and we will set up whatever collection method fits how you already work.
Can I claim the cost of fitting out the restaurant?+
Much of it. Equipment, refrigeration and loose fittings usually qualify for capital allowances and can often be relieved in full in the year of spend. Structural and decorative work does not, and integral features like heating and electrics are relieved more slowly. Get the builder to itemise the invoice while the work is going on — that split is what decides the treatment.
Do I have to account for staff meals?+
Record them, yes. Meals provided on the premises to all staff on the same terms are generally not a taxable benefit, and wastage is a normal cost — but if neither is recorded, the only explanation left for a low gross margin is sales that were never rung up, and that is the conversation you do not want.
Should I record the amount the delivery app pays me, or what the customer paid?+
What the customer paid — that is your sale. The commission is a separate cost, with its own VAT treatment. Recording only the net payout understates turnover, hides the commission, distorts your margin and can leave you believing you are under the VAT threshold when the true figure is well over it. That last one is the expensive version of this mistake.
Can I reclaim VAT on the delivery commission?+
If you are VAT registered and the commission carries VAT, generally yes — but only if it is recorded as a cost in the first place. Businesses that book the net payout never see the commission, so they never claim it. On a busy site the amount left behind over a year is not trivial.
Does HMRC know what I sell through the apps?+
Yes. Digital platforms report seller information, so those sales are visible independently of your records. That is not a reason for alarm if your figures are right; it is a reason to make sure the platform statements are reconciled properly rather than estimated, because a discrepancy between two sets of figures is the most obvious possible starting point for an enquiry.
Local to you
Chartered accountants, just up the road.
We are based in Finchley and work across North London. Come in, call, or do the whole thing by email — whichever suits you.
Or call 07480 281548