Accountants for the UK hospitality industry
Most cafe, pub, and restaurant owners did not open a hospitality business to become a bookkeeper. They opened it for the food, the venue, the team, or the customers. But hospitality runs on the tightest margins of any industry in the UK — and on rules that change more often than most. The Tipping Act came in on 1 October 2024. VAT on the same sandwich can be 0% or 20% depending on whether the customer sat down. Daily takings need reconciling against three or four payment methods. A 30p miscoding on every transaction quietly costs thousands a year.
We handle all of it.
NDCA is an ACCA-regulated, Xero-certified accountancy practice working with UK hospitality businesses — cafes, restaurants, pubs, takeaways, hotels, mobile caterers and food trucks. We charge a fixed monthly fee so bookkeeping, VAT, payroll, tronc and year-end are all managed every month, not panicked at after a deadline.
Contact us today for a free consultation to walk through your situation.
The Tipping Act and tronc — what changed from October 2024
The biggest change to hospitality payroll in years. The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024. The headline rules:
- 100% of qualifying tips, gratuities and service charges must be passed to workers, with the only allowable deductions being tax and National Insurance. Employers cannot deduct processing fees, software costs, or tronc administration costs from tips.
- Tips must be distributed by the end of the month following the month they were received. Smoothing tips across the year is no longer allowed.
- Tips must be allocated fairly and transparently between workers at the same place of business. A written tipping policy is mandatory and must be made available to workers on request.
- Records of qualifying tips and how they were allocated must be kept for three years. Workers can request these records, and unfair allocation can be challenged at an employment tribunal.
- The Act applies to agency workers in the same way as direct employees.
- An independent tronc arrangement is automatically treated as fair, provided the operator is genuinely independent and the employer acts on any unfairness it becomes aware of. A tronc can be a member of staff, an external accountant, or a professional tronc operator.
Independently-run troncs remain the main tax-efficient way to pay tips, because tronc payments do not attract employer or employee National Insurance Contributions when the scheme is genuinely independent. We set up compliant tronc arrangements where appropriate, prepare the tipping policy, and run the monthly distribution and payroll alongside.
The VAT splits that catch hospitality owners out
VAT in hospitality is not one rate. Different parts of the same menu, sold in different ways, attract different rates. Getting this wrong is the single biggest VAT risk in the sector. The rules:
Eat-in food and drink — 20% VAT, no exceptions
If a customer eats or drinks anything on your premises (or at outdoor tables, designated seating, or a shared seating area you provide), the supply is catering — taxed at 20% regardless of what the item is. Cold sandwich eaten at a cafe table — 20%. Bottle of water consumed in the seating area — 20%. Even a piece of fruit, normally zero-rated in a supermarket, becomes 20% when eaten in.
Hot takeaway food — usually 20% VAT
Food is “hot” for VAT purposes if it meets any of HMRC’s five tests: heated to be eaten hot, served hot, advertised as hot, kept hot after cooking (in a hot cabinet or heated unit), or in heat-retaining packaging. Hot coffee, hot sandwiches, fish and chips, kebabs, pizzas — all 20%. The exception: food only hot because it has just been baked (a fresh loaf of bread, a baguette) and is not marketed as hot for immediate consumption — usually zero-rated.
Cold takeaway food — usually 0% VAT, but with exceptions
Most cold takeaway food is zero-rated. The exceptions are “excepted items” listed in VAT Notice 701/14 — including confectionery, sweetened baked goods (chocolate-covered pastries, iced doughnuts), crisps, salted nuts, ice cream, and a long list of speciality items. A plain cold sandwich for takeaway is zero. A chocolate-covered croissant is 20%.
Alcohol — always 20%, eat-in or takeaway
There are no zero-rate exceptions for alcoholic drinks. Beer, wine, spirits, alcoholic mixers, alcoholic dessert items — all 20% regardless of where they are consumed.
Hotel accommodation — 20%
Sleeping accommodation in a hotel, guesthouse, or B&B is standard-rated. There was a temporary 5% reduced rate during the COVID period (July 2020 to March 2022) — that has not been reinstated. The standard 20% rate applies now.
For most hospitality businesses, the VAT bill is the largest tax cost they pay. EPOS systems set up correctly to split each transaction line at the right rate, and a clean monthly reconciliation back to the bank, are where the margin gets protected.
Daily takings reconciliation
A single day in a busy cafe might include cash sales, card payments through one or two terminals, contactless tips into a separate pot, third-party delivery payouts from Deliveroo, Uber Eats and Just Eat (often a week or two in arrears, net of commission), gift voucher redemptions, and till variances. Reconciling that lot every day, against the bank, against the EPOS, against the delivery platform statements, is what keeps the books accurate.
We use Xero with structured daily journals to pull each takings line into the right place — gross sales, output VAT, card and platform fees, delivery commissions, tips. The bank reconciles cleanly. The VAT return is built on accurate numbers. The management accounts show actual margins, not estimated ones.
The tax issues hospitality owners ask us about most
Cost of sales and gross margin
The single most important number in hospitality, and the one most often estimated rather than measured.
Food cost as a percentage of food revenue, beverage cost as a percentage of beverage revenue, labour cost as a percentage of total revenue. Industry benchmarks exist for all three — 28-32% food cost, 18-22% beverage cost, 25-35% labour. Tracking against benchmark each period is how you spot a margin slip before it becomes a profit problem. We build the reporting around these metrics, not against generic small-business templates.
Staff costs, National Minimum Wage and the apprenticeship levy
Hospitality is the most NMW-exposed sector in the country.
Most hospitality staff are paid at or close to National Minimum Wage. Getting age bands, payroll calculations and unpaid breaks right is a compliance issue, not a nice-to-have. HMRC publishes a “naming and shaming” list of employers underpaying NMW — hospitality is consistently the largest sector on it. We run payroll, audit for NMW compliance, handle pension auto-enrolment, and tie tronc into the monthly cycle.
Capital allowances on fit-out
A new kitchen or bar is mostly capital, but parts of it qualify for full expensing or AIA.
Fit-out costs split between structural work (capital, written off over many years through structures and buildings allowance) and qualifying plant and machinery (full expensing for limited companies or Annual Investment Allowance for unincorporated businesses, up to £1,000,000 per year). We split fit-out invoices correctly to maximise the upfront tax relief.
Stock at year-end
Wet stock, dry stock and food on the shelves all need counting and valuing.
Hospitality year-end always includes a stock count — bottles in the cellar, food in walk-in chillers, packaged goods on shelves, consumables. Stock is valued at the lower of cost or net realisable value. We integrate the stock figure into the year-end accounts and reconcile it against EPOS.
MTD for sole-trader operators
Sole-trader cafe or food-truck owners over £50,000 fall into MTD for Income Tax from April 2026.
Most pubs and restaurants are limited companies and unaffected. But sole-trader operators — typically food trucks, market stalls, single-person catering businesses — fall into MTD for Income Tax from 6 April 2026 once gross self-employment income exceeds £50,000. The threshold drops to £30,000 in 2027 and £20,000 in 2028. We get sole-trader operators on Xero and ready for quarterly submissions before the deadline.
What can a hospitality business claim as an allowable expense?
The expenses most often missed:
Cost of sales:
- Food and beverage purchases for resale
- Packaging, takeaway boxes, cups, straws, napkins
- Cleaning chemicals and consumables for kitchen and front of house
- Disposable gloves, aprons, PPE
Property costs:
- Rent or rates on the premises
- Business rates (less small business rate relief where eligible)
- Utilities — gas, electricity, water
- Buildings and contents insurance
- Repair and maintenance of premises
Equipment:
- Kitchen equipment, fridges, freezers, ovens, fryers
- POS systems, card terminals
- Tables, chairs, glassware, cutlery, crockery
- Coffee machines, dishwashers, ice machines
- Capital allowances on bigger purchases — Annual Investment Allowance gives 100% deduction on qualifying plant and machinery up to £1,000,000 per year
Staff costs:
- Wages, employer NIC, employer pension contributions
- Tronc payments to staff (post-NIC where the tronc is independent)
- Staff uniforms and branded clothing with a permanent business logo
- DBS checks and food hygiene certificates
- Training and qualifications (food hygiene, first aid, personal licence)
Marketing and admin:
- Advertising, signage, leaflets
- Social media, website hosting and domains
- Music licensing (PRS, PPL)
- Accountancy and bookkeeping fees
- Public liability and employer’s liability insurance
- Mobile phone and internet (business proportion)
Compliance:
- Premises licence, late-night refreshment licence, alcohol licences
- Food hygiene rating compliance costs
- Waste collection and grease trap servicing
- Pest control contracts
Not allowable: customer entertaining (taking a customer to dinner), the personal-use portion of any expense, and ordinary clothing even if worn for work.
Who we work with
NDCA hospitality clients fall into a few groups:
- Independent cafes, coffee shops and tea rooms
- Restaurants — independent and small group operators
- Pubs and bars, including those with kitchens
- Takeaway and quick-service food businesses
- Hotels, guesthouses and B&Bs
- Food trucks, mobile caterers and market stalls
- Specialist food businesses — bakeries, delis, ice cream parlours
- Catering and events businesses
- Multi-site operators preparing to scale
If your situation is not on the list, send us a message — it almost certainly fits.
How NDCA works
Three things make our service different for hospitality specifically.
Fixed monthly fee
You pay one price every month for everything we agreed at the start — bookkeeping, daily takings reconciliation, VAT, payroll, tronc, year-end, tax. No clock-watching, no surprise invoices when a busy quarter pushes up volumes.
A real human, fast
You get a named accountant who understands the rhythm of a hospitality business. Most questions get a same-day reply — which matters when a payroll question lands on a Friday afternoon and the team gets paid Tuesday.
Built around how hospitality actually runs
Hospitality does not run on calendar months. Cash arrives daily. Delivery platforms pay weekly. VAT is quarterly. Tips have a statutory monthly distribution deadline. Staff turnover is constant. We build the workflow around those cycles, not around a generic accountancy schedule.
Xero is the only platform we use
NDCA is a certified Xero Partner, and Xero is the only bookkeeping platform we run. For hospitality, that matters.
EPOS systems (Square, Toast, Lightspeed, Zettle, SumUp) feed daily takings straight into Xero through structured journals — gross sales, VAT split by rate, fees and refunds all coded correctly. Delivery platform payouts (Deliveroo, Uber Eats, Just Eat) reconcile against the published statements. Live bank feeds match against the takings within 24 hours. The VAT return calculates automatically and submits direct to HMRC under MTD.
If you are not yet on Xero, we migrate you across as part of onboarding. If you are already there, we plug straight in.
Apron for invoice capture
Hospitality is a supplier-heavy industry. Food suppliers deliver multiple times a week. Beverage suppliers monthly. Equipment, packaging, utilities, cleaning chemicals, licence renewals, music licensing — every category has its own invoicing cycle. Most of it arrives by email or in paper form, and most of it ends up on the office floor at month-end.
We use Apron to capture all of it. Forward an invoice to your dedicated Apron email address, or snap a photo of a receipt, and the supplier, date, amount, VAT and line items are pulled out automatically and pushed into Xero — coded to food cost, beverage cost, utilities, or whatever line it belongs on. By the time year-end arrives, every cost is supported by paperwork already in the system.
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Switching from another accountant
If you already have an accountant and the bookkeeping cannot keep up with daily takings, the tronc isn't being run correctly, or the VAT splits are guesswork, switching is simpler than people think. We send your current accountant a professional clearance letter, collect your records, and pick up where they left off. Most hospitality clients are fully on-boarded within two weeks.
You do not need to wait for year-end. You do not need an awkward phone call. We handle it.
Hospitality accounting FAQs
Once your taxable turnover exceeds £90,000 in any rolling 12-month period, yes. For most cafes, restaurants and pubs serving food and drink for eat-in consumption, almost all sales are standard-rated at 20%, which puts even small operators near the threshold quickly. We monitor turnover monthly and register at the right time.
Eat-in: 20%, with no exceptions. Hot takeaway: 20% in most cases (with the five-test rule). Cold takeaway: usually 0%, except for "excepted items" like confectionery, sweetened baked goods, crisps and ice cream. Alcohol: 20% in every scenario. We set up your EPOS to apply the right rate to each item.
Since 1 October 2024, 100% of qualifying tips, gratuities and service charges must go to workers, with only tax and NIC deductions allowed. Tips must be distributed by the end of the month after they were received, allocated fairly and transparently, and supported by a written tipping policy and three years of records. Independent tronc arrangements are automatically treated as fair.
A tronc is a system for pooling and distributing tips, gratuities and service charges among staff. A tronc is operated by a "troncmaster" who can be an employee, an external accountant, or an independent operator. When the tronc is genuinely independent of the employer, tronc payments do not attract employer or employee National Insurance Contributions — which is the main tax-efficiency reason for setting one up.
No. From 1 October 2024, tips must be distributed by the end of the month following the month they were received. Holding tips back for the quieter months is no longer allowed.
Yes. Mandatory service charges (e.g. "an automatic 12.5% service charge") are part of your taxable sales and standard-rated at 20% VAT. Discretionary service charges and voluntary tips are not part of your sales, do not attract VAT, and pass through the tronc to workers.
The NMW (and National Living Wage for those 21 and over) is the legal minimum hourly pay rate. Hospitality is the most NMW-exposed industry in the UK. Common compliance failures include uniform deductions taking pay below the minimum, unpaid time spent setting up or cashing up, and incorrect tip handling. We audit the payroll for NMW compliance every period.
The structural element (walls, plumbing, fixed extraction) is capital, written off over many years. The plant and machinery element (fridges, freezers, ovens, fryers, POS systems) qualifies for full expensing (limited companies) or the Annual Investment Allowance (up to £1,000,000 per year, for any business). We split the invoices correctly to maximise the upfront tax relief.
Food and beverage stock, packaging, kitchen equipment, POS systems, rent and rates, utilities, insurance, repairs, branded uniforms, music licensing (PRS, PPL), staff training, premises licences, public liability insurance, accountancy fees, and the business proportion of mobile and internet. Customer entertaining and ordinary clothing are not allowable.
Sole-trader hospitality operators with gross self-employment income over £50,000 are in scope of MTD for Income Tax from 6 April 2026. The threshold drops to £30,000 in 2027 and £20,000 in 2028. Limited company hospitality businesses are not affected.
Xero, exclusively. We are a certified Xero Partner. We integrate Xero with EPOS systems (Square, Toast, Lightspeed, Zettle, SumUp), with delivery platforms (Deliveroo, Uber Eats, Just Eat) and with Apron for supplier invoice capture.
Yes. NDCA is regulated by the ACCA (Association of Chartered Certified Accountants).
We are remote first. We work with hospitality businesses across the UK using Xero, so location does not matter.
Yes. Book one on 01903 968618 or via the contact form.
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