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HMRC internal manual

VAT Education Manual

Local authority (LA) schools: sales of food and drink to pupils

All sales of food and drink by an LA-maintained school to its pupils can be treated as non-business and outside the scope of VAT if made at or below cost.

Meaning of ‘at or below cost’

It would be almost impossible for a school to determine whether it meets the ‘at or below cost’ criterion by reference to each meal, or each item of food or drink, sold. Consequently, you should accept one of the following broader based approaches if it is adopted.

  1. A school may make a judgement based on all the sales of food and drink to its pupils from all outlets in the school. Provided the total sales are at or below cost, the school can treat all its sales of drink and foods as non-business.
  2. A local authority may be responsible for running all the catering in its schools, including sales of confectionery, snacks and drinks. In these circumstances it is acceptable for the local authority to determine whether this is done at or below cost by reference to the total sales of food and drink it makes in its schools.

In any instance where it appears that a school might fail to meet this criterion according to the global formula, it can make a separate calculation for each outlet (canteen, refectory, tuck shop, kiosk, trolley, vending machine and so on). It should treat sales from an outlet as business only where full costs are exceeded.

‘Cost’ means the fully overhead-inclusive cost of bringing the food and drink to the pupils. This includes, for example, the labour costs associated with cooking hot meals.

When this treatment applies

It is important to remember that this treatment applies only to sales of food and drink by a local authority school to its pupils and from other outlets operated by either the local authority itself or the governing body.

Apportionment will continue to apply, by any fair and reasonable means, to cover sales to staff and visitors.

Supplies by catering contractors

If the actual supply of food and drink is by a catering contractor acting as principal, agent or a combination of both, VAT treatment applies as set out in Notice 709/1 Catering and take-away food.

General approach

In general, unless there is compelling evidence to suggest otherwise, officers should accept that all sales of food and drink by an LA-maintained school to its pupils are non-business.