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HMRC internal manual

VAT Food

From
HM Revenue & Customs
Updated
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Hot and cold take-away food: toasted sandwiches and similar products

Prior to the 2012 changes some businesses or their advisors based their claims for the zero-rating of such products as toasted sandwiches, heated baguettes, grilled paninis and toasted ciabattas around arguments that the supplier’s purpose in heating the product was not to enable it to be eaten hot, but rather to improve its texture and/or to release the flavour of the ingredients. There are several tribunal decisions in this area that are frequently cited in support of such claims.

The Great American Bagel Factory Ltd (V.17018) 

Warren & Warren (V.19902) 

Coffee Republic (V.20150) 

European Independent Purchasing Company (EIPC)[V20697] 

Sub One Ltd (t/a Subway) [UKFTT 487] 

In the Sub One case the appellant argued that the products were not hot within the definition of the law and that the intention was to supply a toasted product rather than a hot product. Both sides produced expert witnesses to testify about the temperature of the products and the Tribunal found for HMRC that the products were above the ambient air temperature. The Tribunal also found for HMRC that it was Subways’ intention to provide a hot product. Factors that they took into account in reaching that decision were

  • that the toasted sandwiches lost their distinctive character and flavour if allowed to cool,
  • the toasting process was intimately concerned with the temperature at which the sandwich was eaten,
  • the appellant’s ethos was to give the customer what they wanted,
  • the whole process was geared up to providing the product as quickly as possible whilst still hot and finally
  • a powerful oven was used.

The Upper Tribunal agreed with HMRC that these products fall within the exclusion of the zero-rate and were taxable at the standard rate of VAT.

Sub One then appealed to the Court of Appeal putting forward three main arguments;

  1. Following the ECJ judgement in Manfred Bog and Others (C-497/09, C501/09 and C502/09), the supply of hot food was one of goods and could not therefore be ‘a supply in the course of catering’.
  2. The exclusion for hot food from zero-rating was in breach of fiscal neutrality because it relied on a subjective test, and
  3. The exclusion for hot takeaway food is uncertain in its application and therefore in breach of legal certainty.

The Court of Appeal dismissed these arguments and found that UK legislation on hot take-away food, including the exception to the zero rate for supplies made in the course of catering (which also includes food supplied for consumption on the premises which it is supplied), fully complies with EU law and does not result in a breach of fiscal neutrality.

The decision in this case is not yet final.