What VAT rate do we apply to a hamper?

Q. We trade as a food and drinks wholesaler. With Christmas approaching, we will be selling a hamper that includes a range of food and drink items, including tins of luxury fruit, jams, cakes, wine and chocolates. Our plan is to sell each hamper for £49.99 to include VAT but how much VAT should we declare on each sale?

A. The hamper clearly includes some zero-rated food items, such as the tinned fruit and cakes but also standard-rated products such as wine and chocolates. The hamper itself will have value for the customer and is also standard-rated. You are therefore making a mixed supply for VAT purposes and must apportion your output tax.

You can use any calculation that is fair and reasonable, but the best method will probably be to work out how much you paid for the zero-rated products and how much for those which are standard-rated to give an overall percentage of standard-rated items in the package, i.e. a cost-based apportionment. To illustrate, suppose 60% of the items are standard-rated, including the hamper, your output tax on each sale will be: £49.99 x 60% x 1/6 VAT fraction = £5.