One constant about being an accountant or tax advisor at Christmas parties is people asking, “How do I save tax?” This always reminds me of a comedian who wondered why people at parties expected him to tell them a joke… but never expected his friend—a chef—to instantly bake a cake. This got us thinking about how funny the VAT rules around food are and how someone might try to plan the food at their party to save some VAT.
You’ll have to host your party at home because as soon as you go to a restaurant or hotel, you’ll be paying VAT on your meal. Opting to prepare your own meal may be more VAT-friendly - but only if you know what you’re looking for. Here are a few VAT-free Christmas Party menu options you could consider.
Sadly, if it’s an alcoholic drink you’re buying, then VAT is charged, and that’s on top of whatever alcohol duty applies. It won’t be easy to get around it – any kit you buy to brew your own beer or make your own wine will be subject to VAT. You’d need to buy all the components in ‘raw’ form and then make your own – serious tax planning by anyone’s measure.
Similar rules apply to many non-alcoholic drinks. Even a healthier fruit juice option has VAT; that said, buying your own fruit and juicing it is going to be easier than brewing beer so you may be tempted. Just bear in mind that if you use an electric juicer there’s VAT on the electricity… so elbow grease is the only VAT-free method.
Perhaps the easiest route would be to have an afternoon tea party. Tea, coffee, and hot chocolate are not subject to VAT, so your guests could have something to drink and remain VAT-free.
One final word on drinks: if any kids are invited, and you’re thinking of offering them a milkshake - watch the flavouring! A chocolate milkshake powder is generally VAT-free because it is classed the same as cocoa and hot chocolate, and the strawberry flavours can be VAT-free because some of their recipes contain enough milk powder that they’re classed as dried milk. However, it seems that the banana flavoured ones are almost always subject to VAT because they contain very little milk powder, so they might not be the best choice for a VAT-conscious party planner.
The good news is that the options for VAT-free food are much wider – but there are still some pitfalls to beware of. Often, you can buy raw ingredients VAT-free and then make your version of something that would be subject to VAT if you bought it. My granny always used to make things like Scottish tablet and coconut ice at Christmas; although it wasn’t a conscious VAT dodge, it would have appealed to her sense of financial savvy. As with the juicing, though, as soon as the oven or cooker goes on, you are paying some VAT on the fuel!
If you’re buying everything in, the best place to shop might be the middle aisle of your local German-owned supermarket, but care should be taken if side-stepping VAT is the goal: the Lebkuchen and Panettone may be VAT-free, but the Florentines are not.
Crisps and nuts are common party foods. Anything potato-based is subject to VAT. The makers of a certain stackable, extruded potato-based snack, sold in tubes (once you pop, you can’t stop!), tried to argue that they were only 42% potato and therefore not subject to VAT; they lost their court case on appeal. However, if you’re in the supermarket's crisp aisle, you’ll probably also see bags of carrot/parsnip/beetroot prepared in exactly the same manner as ‘normal’ potato-based crisps. These are VAT-free, along with tortilla chips and lentil chips. Prawn crackers can be VAT-free, but it depends on what they’re made of: tapioca-based crackers are VAT-free, but anything based on other cereals isn’t… read the side of the packet!
If nuts are more your thing, you can get around VAT by choosing nuts that still have their shells on or nuts that are sold for ‘home-baking’. Virtually all roasted/salted nuts are subject to VAT if you buy them ready made so roasting your own would be key to minimising VAT. Popcorn is the same: there’s no VAT on the kernels – including ‘microwave popcorn’ – but bags of ready-popped corn are subject to VAT so you need to pop your own.
At the sweeter end of the food scale, cake is VAT-free (Jaffa Cake, anyone?), and this extends to all sorts of things like meringues, pastries, and even Uddingston’s finest teacakes.
The position with biscuits is a little trickier because it depends on how (or if) they’re coated. An iced biscuit is VAT-free, but anything covered in chocolate is subject to the tax; hence, a gingerbread person with chocolate trousers will cost you VAT, whereas one with an iced waistcoat using chocolate dots as the buttons won’t. Bourbons are fine because the chocolate is a ‘filling’ not a ‘covering’. Shortbread is the trickiest of all: plain shortbread is VAT-free, but chocolate-coated is not… until you upgrade to caramel/millionaire’s shortbread, which becomes VAT-free again because the chocolate is not directly covering the biscuit.
Perhaps you’re tempted to serve a dessert; ice cream, sorbet, and the like are specifically subject to VAT. To slim your VAT cost, you’d need to choose something like a mousse, cheesecake, or cream gateaux. The only ice cream-based dessert that comes VAT-free is Baked Alaska. This is because it requires further cooking when you take it out of the freezer, making it a ‘ready meal’ rather than ‘ice cream’.
So there you have it – some of the common pitfalls you’d need to avoid if you want to save some tax on your Christmas party.
The most luxurious VAT-free choice is probably caviar, but to skip VAT altogether, you’d have to serve it with Darjeeling—the champagne of teas – rather than the usual fizz.
Whatever you choose to serve – best wishes for the festive season and a healthy, happy 2025!
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