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HMRC internal manual

VAT Food

Excepted items: catering: introduction and background

Group 1 Schedule 8 of the VAT Act 1994 specifically excludes catering from zero-rating. FOOD4100 looks at legal references to catering and VAT, and the reason for its exclusion from zero-rating.

Catering has been excluded from the zero-rated relief since the introduction of VAT in 1973 on the basis that there is a distinction between

  • the provision of food and drink where the customer purchases it and is responsible for its preparation before eating, and
  • the situation where the supplier provides prepared food ready for immediate consumption.

Although open to debate, the difference was seen to be between what might be considered essential and what might be considered a luxury. There have been two major changes to the legislation relating to catering.

The first came in 1984 when, from 1 May 1984, Note (3) to Group 1 was extended to exclude hot take-away food from zero-rating. This mainly affected retail outlets such as fish and chip shops and take-away outlets. Remember that a supply in the course of catering is a supply of goods and not services.

The second came into effect on 1 October 2012 when Notes (3A), (3B), (3C) AND 3(D) were introduced. This was because the rules for charging VAT on hot takeaway food had become increasingly prone to legal challenges which had led to anomalies where similar products were being taxed differently. These changes introduced a number of objective tests to address these anomalies to ensure that hot takeaway food is taxed consistently at the standard rate of VAT.

In the joined German cases of C- 497/09, C-499/09, C501/09 and C-502/09 (Manfred Bog and others)the ECJ ruled that the supply of food or meals freshly prepared for immediate consumption from snack stalls, mobile snack bars or in cinema foyers is a supply of goods within the meaning of Article 5 of the Sixth VAT Directive if a qualitative examination of the entire transaction shows that the elements of supply of services preceding and accompanying the supply of the food are not predominant. This is unlike the activities of a party catering service which are supplies of services within the meaning of Article 6 except in cases in which a party catering service does no more than deliver standard meals without any additional elements of supply of services.

The significance of the decision for German taxpayers is that certain supplies of hot food previously treated as supplies of services may now be eligible for the reduced rate.

HMRC takes the view that the zero-rating provisions form a specific legal framework and since the UK has specifically legislated to exclude supplies of hot food from the zero rate, the above decision does not have implications for UK businesses who should continue to treat their supplies in accordance with published guidance.