VAT reduction for children’s meals – and service charges?
I have a question about the temporary VAT rate reduction from 20% to 5% for supplies of children’s meals served on the premises of a restaurant between 25 June 2026 and 1 September 2026. My question relates to compulsory service charges added to the cost of meals by my client, who trades as a restaurant:
- My understanding is that service charges are always standard rated, so if a meal costs £120 including VAT, a 10% service charge will add £12 including 20% VAT.
- A colleague says this is wrong and that the VAT rate for the service charge follows the liability of the meal, ie if part of the meal is for a child and subject to 5% VAT, the service charge will also be subject to 5% VAT.
Is my colleague correct?
If the 5% rate applies, what happens if a total bill includes some children’s meals (5% VAT) and some adult meals (20% VAT). Do we apportion the service charge?
Query 20,731 – Kentucky Keith.
Residential lease extension
A close company owns the freehold of a development of flats and the leaseholders, who are the company’s shareholders, wish to extend their leases without payment of a premium. If the usual procedure of surrendering the current lease and the grant of a new lease is followed, it will result in a capital gain for the company because it will be regarded as making a part-disposal of the freehold and the shareholders will be liable to tax, either under the deemed loan provisions in CTA 2010, s 455, or on a deemed dividend.
I have seen reference to concurrent leases where, instead of surrendering the existing lease, it is extended by granting a lease of the reversion (a ’concurrent lease’). This runs alongside the existing lease and it is said that this effectively extends the tenant’s right to occupy without altering the original lease for tax purposes.
Do readers have experience of concurrent leases in these circumstances? Do they have the desired effect of avoiding all tax liabilities for both the freeholder and the leaseholders, and are there any other matters to be taken into account when considering them?
Query 20,732 – Curious.
FIG reporting
I’ve just about got my head round the way that foreign income and gains (FIG) work as far as the computations go, but I am now trying to work out how they should be reported on the self-assessment (SA) return. Relief is given on a source-by-source basis, but the return does not ask for source-by-source information.
I’ve spoken to a few acquaintances in other firms and they are similarly unsure about what to do.
There seem to be three main schools of thought:
- put the detailed information into the white space;
- add an attachment giving the detailed information; or
- give just the minimum information required.
The third option is the simplest, but I would have thought that it is more likely to lead to HMRC asking questions about how the relief has been calculated.
I’ve also seen it suggested that a very small margin of error should be included in the claim, just to be on the safe side. Is that wise, or could it lead to the entire claim being rejected?
I’d be interested to hear how other Taxation readers are dealing with FIG claims in clients’ SA returns.
Query 20,733 – Confused.
Is all lost?
I act for a three-partner partnership of unrelated individuals (A, B and C) carrying on a design business. It had been profitable, but in the past few years has been loss making and has accumulated trading losses brought forward.
Unfortunately, Mr C died suddenly last month. His wife was previously employed in the business in a senior capacity, and it has been agreed that she will step into his shoes as the third partner of the business. His will left everything to his wife.
Is there any way that Mrs C can access the brought-forward losses accrued by Mr C at the date of his death?
Terminal loss relief at C’s death is not possible as there had been no profits within the carry-back period. I fear that the benefit of Mr C’s losses disappeared on his death.
Is that right, or do Taxation readers have any ideas about how the losses could be used?
Query 20,734 – Hopeful.
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