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HMRC internal manual

VAT Food

From
HM Revenue & Customs
Updated
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Hot and cold take-away food: purpose

Prior to the 1 October 2012 changes the law stated that a supply of hot food was standard-rated if it:

(i) ‘has been heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature; (The purpose test), and

(ii) is above that temperature at the time that it is provided to the customer’. 

The asserted purpose of the supplier in heating the food needed to be tested against all the facts and circumstances relating to the actual supply.

With effect from 1 October 2012 the ‘purpose test’ is only one of the 5 tests that now need to be applied to food that meets the ‘precondition’ which is that the food (or any part of it) is hot at the time it is provided to the customer.

Prior to 1Ooctober 2012 we considered that certain types of hot food (such as those listed at VFOOD4220) were more likely to satisfy the purpose test and were therefore generally standard-rated. The 2012 changes clarified the law. : These are items that are commonly (if not universally) regarded as meals or snacks to be eaten hot. In most cases they are unpalatable, or at least significantly less desirable to eat, when served cold.

In cases of doubt, in relation to periods prior to the 2012 changes it is important to ask the supplier at an early stage to state what their purpose was for heating the food. Where the supplier argues that he heated the product for a purpose other than to enable it to be consumed hot, it is necessary to consider all the facts and circumstances relating to how the food is supplied in order to test the validity/credibility of the trader’s assertion.

The Court of Appeal’s reasoning in the case of John Pimblett & Sons Ltd (ref ?) that this a purely subjective test has now been overturned by the Court of Appeal in Subway. However, its conclusion on the facts of that case remains correct. Pimblett concerned the VAT liability of meat pies that had been baked and left to cool naturally (hence some of the pies were still hot when sold, and others weren’t). The appellant claimed that the pies sold in its retail outlets were supplied hot merely because they had recently been removed from the ovens. They argued that their purpose was to supply freshly baked products, rather than to enable the pies to be consumed hot. They made no provision for keeping the pies hot or for re-heating them, and whether a pie was consumed while still hot was not their concern.

Whilst no one indicator is conclusive, many possible indicators that the purpose is to supply hot takeaway food have been discussed in court and in casework. These include the:

  • type of outlet - would it be seen as a takeaway food outlet within the normal and everyday meaning of the term?;
  • food is generally accepted as being unpalatable when cold (however, the reverse does not necessarily apply - the fact that an item remains palatable when cold does not preclude the possibility that it was heated for the purpose of enabling it to be consumed hot, for example pizzas);
  • food would be thrown away once cold;
  • food is microwaved (or otherwise heated) by the trader on request;
  • food spoils on reheating;
  • use of heat-retentive containers / wrapping;
  • food is advertised or promoted as being for consumption whilst still hot (this includes evidence such as in-store signage, web sites and the wording shown on packaging);
  • once cooked / heated, effort is made by the trader to keep the product hot;
  • condiments, napkins or utensils are made available to facilitate immediate consumption; and
  • trader reheats or replaces food on complaint that it is too cold.

Indicators that the purpose is not to supply hot take-away food include:

  • it is made clear to customers that they should reheat the food at home, and instructions are given;
  • food is kept at a minimum temperature (normally 63 degrees C) for hygiene reasons (but any such claims must be examined critically, as compliance with food safety regulations will often not be an aim in itself for the supplier - see VFOOD4300); and
  • food is left to cool naturally and is not reheated prior to sale.

In most pre 1 October 2012 cases, what the supplier did to the product between the time it was cooked or heated and the time it was handed to the customer was an important indicator. Where efforts were made to keep it hot, it is reasonable to assume that that there must have been a commercial reason for doing this (as the heating will entail a cost to the business). It should not automatically be assumed that the reason was to enable the food to be consumed hot, but there was an onus on the supplier to put forward a credible alternative.

The Domino’s Pizza Group Ltd (V.18866) which predated the 2012 changes was a win for HMRC where the trader claimed to heat pizzas to cook them, to produce a freshly baked product and to comply with health & safety regulations, but not to enable the food to be consumed hot. However the Tribunal agreed with HMRC that, whilst the trader may have claimed to have other purposes for heating the food, the dominant purpose was to enable the food to be eaten hot. Crucial to the outcome of the case was a consideration of what the trader did with the product after heating it.

With effect from 1 Oct 2012 as all of the 5 tests outlined in VFOOD4220 need to be applied, and if any one of the tests is met the food is S/R, it should be easier to confirm whether the conditions for zero-rating to apply are met.