Vat Registered company and unregistered co.sharing one epos system

We want to introduce a franchise catering operation whereby the catering receipts are processed through our till and card machines along with drinks and then paid out completely to the franchisee weekly. The franchisee is not vat registered and therefore is no vat element in the food receipts which they receive intact. She is supplying food directly to our customers . Monthly we would charge a percentage fee which would include vat as we are registered . Is there a potential problem from HMRC for operating two businesses through the same till? The food element would be clearly identifiable on the till reports. The EPOS system would simply be a tool we are sharing to streamline our separate accounting systems.

Hi RichardHa,
If the franchisee is not VAT registered then any sales made by them will not be subject to VAT.
Any commission which you charge the franchisee would attract VAT as you are VAT registered and making a taxable supply.
We can not see there is an issue with the franchisee catering sales  going through your till as long as it is very clear that these sales are being made by the franchisee and not yourself and these are clearly recorded.
We would also recommend drawing something up in writing to your franchisee to confirm this arrangement so as to avoid any issues.
Thank you.