The Eat Out to Help Out scheme starts from 3rd August with a view to revive the struggling leisure and hospitality industry amid covid-19.
Those that dine out on Monday, Tuesday or Wednesday this month can save on their meal costs providing they eat at the restaurant. Discounts are not available on service charges and alcoholic drinks. The scheme caps the discount at £10 per person.
Participating restaurants, which you can find details of here, are expected to offer the discount all day on all qualifying foods and drink.
The VAT question for restaurants
Where a true discount is given, VAT is due on the discounted amount. HMRC have however confirmed that VAT is due on the full value of the bill before any discount is applied. The logic behind this is presumably that whilst the customer is only paying part of the bill themselves, the restaurant is still receiving full consideration for the supply, in the way of third party consideration from the scheme. Alongside the scheme you can continue to apply the temporary reduced rating for VAT on these catering supplies.
Food cost – £15
Non-alcoholic beverages – £5
Total bill – £20
Total paid by customer = £10
Total paid by Government scheme = £10 (50% of the total bill as it is all for food and non-alcoholic beverages)
VAT due to HMRC = 1/21 of £20 = 0.95p (1/21 is the VAT fraction to extract 5% VAT from a VAT inclusive price)