Quick answer: If your restaurant is VAT-registered, Making Tax Digital (MTD) for VAT means you keep VAT records digitally and send returns to HMRC through compatible software, with no manual re-keying between programs. The practical fix is to make sure sales data flows from your EPOS to your accounts and return software automatically.
Most restaurant owners do not dislike VAT as such; they dislike the month-end scramble of exporting till reports, pasting figures into a spreadsheet and hoping nothing slipped. Making Tax Digital for VAT was designed to end exactly that kind of manual handling. This guide explains, in plain language, what it means for a UK restaurant, café or pub, and what to check in your tills and accounts set-up.
Key takeaways
- VAT-registered businesses are within MTD for VAT, whatever their turnover.
- Returns must go to HMRC through software that connects to HMRC systems.
- Data moving between programs needs digital links, not copy-and-paste.
- Restaurants have a head start if the EPOS, stock and accounts already share data.
- Get VAT treatment of dine-in, hot takeaway and cold food right at the till.
What is Making Tax Digital for VAT?
MTD for VAT is HMRC’s requirement that VAT records are kept digitally and VAT returns are submitted from software, rather than typed into the HMRC website. Summaries of VAT Notice 700/22 explain that from 1 April 2022 all VAT-registered businesses are covered, including those that registered voluntarily (Ross Martin: VAT Notice 700/22 summary). The Low Incomes Tax Reform Group also provides a plain overview (LITRG: what is MTD for VAT).
What does ‘functional compatible software’ mean?
The notice describes compatible software as a program, or set of programs, that can connect to HMRC systems through an API. A spreadsheet can qualify when paired with bridging software that makes that connection. You cannot simply email a spreadsheet or upload a PDF.
For a restaurant this usually means one of two set-ups: accounting software that files directly, or a spreadsheet plus a bridging tool. The first is easier to maintain because there is less to go wrong at quarter end. Sanguine’s WebBooks accounting is built as MTD-ready, and it sits alongside the POS rather than apart from it.
What are digital links, and why do they matter in a kitchen business?
A digital link is an electronic transfer of data between programs without manual intervention. Examples accepted in summaries of the notice include linked spreadsheet cells, formulas, and CSV or XML imports and exports. Re-typing a Z-read total into another file is not a digital link.
This is where hospitality businesses trip up. Sales come from the till, purchases from supplier invoices, and payroll or delivery-platform income from yet other places. Every hand-off is a place for a manual step to creep in. Use the checklist below to map yours.
A quick checklist for your restaurant
- Confirm you are VAT-registered and check your sign-up status in your HMRC online account.
- Write down every system that holds VAT-relevant data: EPOS, stock, delivery platforms, bank feed, accounts.
- Mark each hand-off as automatic (integration, import or export) or manual.
- Replace manual hand-offs with integrations or file imports.
- Choose software that connects to HMRC, or add bridging software to your spreadsheet.
- Run a dry reconciliation of one week’s sales against the return figures before the deadline.
- Agree with your accountant who submits, and who approves.
How does sign-up work?
HMRC’s developer guide describes a sign-up journey using a Government Gateway account and says approval can take up to three days (HMRC: VAT MTD set-up guide). Do not leave it until the day of your return. The British Business Bank notes that some newly registered businesses may be signed up automatically, so check your account before assuming either way (British Business Bank: what is MTD?).
Getting VAT right at the till
Digital filing only helps if the figures are right. GOV.UK’s catering guidance explains that most food and drink is zero-rated, but supplies made in the course of catering are standard-rated, and it sets out three tests: ordinary catering, on-premises consumption and hot takeaway food (GOV.UK: Catering, takeaway food and VAT (Notice 709/1)).
| Sale type | Question to ask | What to set up |
|---|---|---|
| Dine-in meal | Is it catering for on-premises consumption? | VAT code on every menu item |
| Hot takeaway | Is it sold hot for eating off the premises? | Separate takeaway item or order type |
| Cold takeaway food | Does the guidance treat it as catering? | Check Notice 709/1 and ask your adviser |
| Delivery-platform order | Which items and prices are charged? | Map platform items to the right VAT codes |
Order type matters, because the same dish can be treated differently when eaten in and taken away. A restaurant POS that applies the VAT code by item and order type reduces end-of-month correction work, and delivery orders from Deliveroo, Just Eat or Uber Eats can arrive through Portal Integration rather than being re-keyed.
Where do stock and sales reports fit in?
Purchases drive input VAT, so supplier invoices need the same digital discipline as sales. Recording deliveries against recipes in WebStocks gives you a clean purchase trail and a view of food cost at the same time. If you run several sites, the chain management set-up keeps VAT-coded sales consistent across outlets. For more on picking the right tills in the first place, see our guide: How to Choose an EPOS System for a UK Restaurant.
Common mistakes to avoid
- Treating the accountant as the only person who needs to understand the data flow.
- Leaving sign-up until the return is due.
- Exporting till data to a spreadsheet, then editing it by hand.
- Using one VAT code for all items when order type changes the treatment.
- Ignoring delivery-platform income until quarter end.
If you would like to see how sales, stock and accounts can connect in one place, book a free demo or start a 14-day free trial. There is no 12-month contract.
Frequently asked questions
Does Making Tax Digital for VAT apply to small restaurants?
Yes, if the business is VAT-registered. Summaries of VAT Notice 700/22 explain that since 1 April 2022 all VAT-registered businesses are within the scheme, including those that registered voluntarily. A very small café that is not VAT-registered is not affected.
Can I still submit my VAT return through a spreadsheet?
Only if the spreadsheet is combined with bridging software that connects to HMRC and any links between files are digital, such as linked cells or file imports. Typing or copying figures between programs by hand does not count as a digital link.
Do I need to sign up separately for MTD for VAT?
HMRC’s developer guide describes a sign-up process using a Government Gateway account and says approval can take up to three days. Some sources say new registrations may be signed up automatically, so check your HMRC online account before your first return.
Is my EPOS system enough to meet MTD?
An EPOS records sales and VAT, but the return must be sent through software that connects to HMRC. Ask your accountant or provider how your sales data reaches that software, and that the route involves no manual re-keying.
Which VAT rate applies to restaurant and takeaway food?
GOV.UK guidance on catering and takeaway food explains that most food is zero-rated, but supplies made in the course of catering, including on-premises meals and hot takeaway food, are standard-rated. Check the notice for edge cases.