HMRC Restaurant VAT Update: 5% Rate for Children’s Meals

Restaurants, cafes and similar catering businesses should check HMRC’s detailed conditions before applying the temporary 5% VAT on children’s meals.

The reduced rate is already in force and reflects enacted law. It applies from 25 June 2026 to 1 September 2026 inclusive. HMRC last updated its detailed guidance on 27 July 2026.

This is not a general 5% VAT rate for restaurant food. It applies only when a supply meets HMRC’s conditions for a children’s meal. A separate HMRC consultation on possible EPOS and MPOS software standards is covered later in this update; those till measures are proposals, not current requirements.

Accuracy note: Source status checked on 6 August 2026 against HMRC’s Revenue and Customs Brief 5 (2026) and its open EPOS/MPOS consultation.

Temporary 5% VAT on qualifying children’s meals

From 25 June to 1 September 2026 inclusive, qualifying children’s meals supplied by restaurants, cafes and similar catering establishments can be charged at 5% VAT instead of the standard 20% rate.

HMRC treats a child as a person under 18 for this relief.

A meal qualifies only where both of HMRC’s conditions are met:

• it is held out for sale only as a meal for children; and
• it is supplied as part of catering services for consumption on the premises.

Whether a meal is held out for sale only as a children’s meal depends on how it is marketed, presented and priced, rather than on who eventually eats it. Inclusion on a distinct children’s menu is HMRC’s example of relevant evidence.

What does not qualify

The temporary reduced rate does not automatically apply to every small or inexpensive meal. HMRC specifically excludes:

• takeaway meals;
• smaller portions that are not presented as children’s meals;
• lower-calorie options;
• discounted versions of adult meals;
• shared meals intended for adults and children; and
• add-ons or upgrades selected from the standard menu, which retain their normal VAT treatment.

Where the same dish appears on adult and children’s menus, the children’s version should normally be differentiated by price, portion size or both. Portion size alone is not decisive.

Drinks, desserts and fixed-price children’s menus

A fixed-price children’s meal that includes a main course, non-alcoholic drink and dessert can qualify in full where it is supplied for one inclusive price.

Where a drink or dessert costs extra, it may also qualify if it is offered on the children’s menu. An optional item, add-on or upgrade from the standard menu keeps its normal VAT treatment.

Meals containing alcohol cannot be treated as children’s meals for this relief.

Kids-eat-free promotions need particular care

Restaurant promotions such as “kids eat free” or “children eat for GBP1 with an adult meal” do not automatically receive the 5% rate.

HMRC says that where the adult and children’s meals form a single supply, the VAT treatment normally applies to the whole package. That will usually leave the package standard-rated.

The reduced rate may apply where the children’s meal is genuinely supplied separately and the arrangement has not been artificially split. If a restaurant apportions one price between separate supplies, the method must be fair and reasonable and supporting records should be retained.

Party packages can produce a different result

A children’s party package may include food, admission, entertainment, decorations or other services. The restaurant must consider whether the customer is buying one overall supply or several separate supplies.

Where the package is one supply, its VAT liability normally applies to the package as a whole. A package combining a children’s meal or admission with other goods or services will therefore usually be standard-rated. HMRC says the temporary rate applies to the whole package only where every element is eligible and no additional goods or services, such as a party entertainer, are included.

Where eligible meals or admissions are genuinely supplied separately, those elements may qualify. Businesses should avoid artificial splitting and document any apportionment used.

Flat Rate Scheme businesses

The temporary rate does not change the VAT Flat Rate Scheme percentages. Restaurants using the scheme should continue applying their existing flat-rate percentage when calculating the VAT due to HMRC.

This is easy to miss: the VAT charged to a customer and the method used to calculate the Flat Rate Scheme payment are related but not identical.

Practical checklist for restaurant owners

1. Confirm that qualifying meals appear on a clearly identified children’s menu.
2. Check that menu descriptions, pricing and till buttons distinguish children’s meals from adult or small-portion products.
3. Apply 5% only to qualifying eat-in supplies.
4. Keep takeaway sales at their normal VAT liability.
5. Review drinks, desserts, upgrades and adult-menu add-ons separately.
6. Check the VAT treatment of kids-eat-free offers and party packages before relying on the reduced rate.
7. Retain evidence supporting any fair and reasonable apportionment.
8. Make sure receipts, VAT reports and bookkeeping exports use the correct tax code.
9. Prepare to restore the normal VAT treatment for supplies from 2 September 2026.
10. If using the Flat Rate Scheme, continue applying the existing scheme percentage.

The government’s announcement said it expected businesses to pass the saving on to customers. That expectation is separate from the statutory tests determining whether a supply qualifies. Restaurants should make sure advertised prices, till settings and accounting records agree.

Separate HMRC consultation: possible EPOS and MPOS standards

HMRC published a separate open consultation on possible mandatory standards for Electronic Point of Sale and Mobile Point of Sale systems. It is particularly relevant to retail, takeaway and hospitality businesses and runs from 23 June to 18 August 2026.

Electronic Sales Suppression, sometimes called till fraud, involves manipulating digital sales records to hide or reduce transactions. HMRC is considering measures that could include:

• complete and unalterable transaction logs using the OECD Standard Audit File for Tax data format;
• encrypted chaining of individual transactions and adjustments;
• registration or certification of EPOS and MPOS systems;
• specified information on receipts and till reports, potentially with mandatory receipting; and
• streamlined compliance checks aimed at the retail sector.

These are consultation proposals, not current operating requirements. Responses will inform any future policy. HMRC says measures would likely be introduced over time, but the process and implementation timetable have not been decided.

Compliant restaurants should nevertheless review whether their till system preserves a clear audit trail for voids, refunds, discounts and amended transactions. Sales reports should reconcile to card receipts, cash records, delivery-platform income and the accounting system.

Speak to SKN Chartered Accountants

Incorrect VAT coding can affect customer prices, VAT returns, management accounts and cash flow. Restaurants should check the treatment before changing menus or till settings, particularly where promotions or mixed packages are involved.

SKN Chartered Accountants supports restaurants, cafes, takeaways and other hospitality businesses with VAT, bookkeeping, payroll, accounts and tax compliance.

Call: 0121 631 8521
Visit: sknservices.co.uk

Official sources

• HMRC Revenue and Customs Brief 5 (2026): temporary reduced rate of VAT
• HMRC consultation: electronic sales suppression and EPOS/MPOS standards
• Government announcement: Great British Summer Savings

Disclaimer

This article provides general information only and does not constitute tax, legal or financial advice. VAT treatment depends on the precise facts, including how a supply is marketed, priced, presented and bundled. Professional advice should be obtained before changing VAT codes or filing a VAT return.