Hospitality bookkeeping: VAT rates and cash records
Written by Ilias Aarrass7 min read · Published on · Last reviewed on 
In short
In hospitality you charge 9 per cent VAT on food and most drinks, while some drinks fall under 21 per cent, and your cash records must balance every day.
- A package combining food and drink is split according to the actual ratio.
- A negative cash balance means turnover is missing; the inspector may then estimate it.
- Wastage, breakage and staff consumption are recorded separately, or they look like unrecorded sales.
- Unsold stock is not yet a cost and raises your profit for that year.
Hospitality is the sector where a tax audit most often turns something up, and that comes down to two things: two VAT rates run alongside each other and a lot of cash changes hands. Both are manageable, provided you set things up properly from day one. This article covers what makes hospitality records different.
Two VAT rates at the same table
In hospitality you charge nine per cent VAT on food and on most drinks. Some drinks fall under the high rate of twenty-one per cent. So a single bill often contains both, and your till system must make that split automatically.
Where it goes wrong is the edge cases. A package deal combining food and drink for one price must be split according to the actual ratio. A product a guest takes home also follows a different regime than the same product at the table.
| Product | VAT rate |
|---|---|
| Meals, snacks, coffee, tea, soft drinks | 9% |
| Drinks at the high rate | 21% |
| Package with food and drink | Split by actual ratio |
| Room hire charged separately | Usually 21%; bare rental can be exempt |
Cash records: this is where audits land
If you accept cash, you must keep cash records that balance daily. That means: opening balance, receipts, payments, closing balance, and that closing balance must match what is actually in the drawer.
A negative cash balance is the clearest alarm bell there is. If your books show cash below zero, you spent money you did not have, meaning turnover went unrecorded. An inspector who sees that may estimate your turnover. More on the requirements in cash records.
- Count the till every day and record the count, even on uneventful days
- Keep all Z-readings from your till system; that is your turnover evidence
- Book private drawings from the till separately, not as costs
- Record tips according to the arrangement you have with your staff
- Make sure the receipt for every cash purchase ends up in your records
Stock and wastage
At year-end you count your stock of drinks and non-perishables. That count is no formality: unsold stock is not yet a cost, so it raises your profit for the year. See valuing stock at year-end.
Wastage, breakage and staff consumption should be recorded separately. If you do not, a gap appears between purchases and turnover that looks, in an audit, like unrecorded sales.
Gross margin as a test
In hospitality audits the tax office often works backwards from purchases: how many kilos of coffee or litres of soft drinks did you buy, how many cups and glasses is that, and what turnover should follow. If your margin deviates sharply from the sector norm, questions follow. Well-kept wastage records are your answer.
Staff in hospitality
As soon as you employ staff, payroll administration follows: payroll taxes, the hospitality collective agreement and the work-related costs scheme for staff meals and consumption.
If you work with on-call staff or freelancers behind the bar, watch out for false self-employment. A bar worker who follows your rota, uses your bar and obeys your rules is usually an employee in tax terms.
Starting with a food truck or a small venue
Starting small means the same VAT rules but simpler records. What comes on top are permits and pitches. That is covered in starting a food truck.
If you stay under the turnover threshold, the small business scheme may be attractive. Do the maths though: in hospitality you buy a lot with VAT on it, and under the scheme you cannot reclaim it.
Frequently asked questions
Which VAT rate applies in hospitality?
Nine per cent on food and most drinks, twenty-one per cent on drinks that fall under the high rate. A package containing both is split according to the actual ratio.
Do I have to keep cash records?
Yes, as soon as you accept cash. Those records must balance daily: opening balance, receipts, payments and a closing balance matching the actual till.
Why is a negative cash balance a problem?
Because it is impossible. If your books show cash below zero, you spent money that was not there, so turnover went unrecorded. The inspector may then estimate your turnover.
How do I book wastage and staff consumption?
Separately, with daily or weekly records. Without them a gap appears between purchases and turnover that an audit reads as unrecorded sales.
Can I put a freelancer behind the bar?
Often not without risk. If someone works to your rota, with your equipment and under your rules, tax law usually sees an employment relationship and you risk an additional assessment.
Sources
- VAT rate for drinksBelastingdienst · belastingdienst.nl
- VAT rates: 21%, 9% and 0%Belastingdienst · belastingdienst.nl
Sources checked on
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
