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HMRC internal manual

VAT Food

Excepted items: catering: premises: our interpretation - prior to the introduction of Note 3A which took effect from 1 October 2012

Our view was that the wording of Note (3)(a) to Group 1 ensured that all meals supplied in premises such as restaurants, cafes and canteens are, as Parliament intended, excluded from zero-rating. Such supplies, not linked to a particular event, may not be included in every person’s interpretation of catering, but are so similar in nature that they are, for VAT purposes, treated in the same manner. For restaurant meals and the like, standard rating is correct and rarely disputed.

However, HMRC’s policy formerly considered that the premises occupied by a retailer was part of a much wider area that the retailers unit was located within, with a particular focus on whether there was a restriction on access to the wider premises. The policy considered whether a retail outlet catered to a closed group of people, such as the customers within a restricted access area, as opposed to a retail outlet situated in a public thoroughfare that could sell to anybody. However, this policy was changed in 2006 following the Compass Contract Services UK Ltd case (V.19053 & [2006] EWCA Civ 730).

Following the Compass decision, premises within Notes 3(a) and 3(b) of Group 1 were interpreted as being:-

  • the area occupied by the retailer; or
  • the area controlled by the retailer; or
  • the area made available for the retailer’s customers to consume their purchases from the retail outlet (usually in conjunction with the provision of such facilities as tables and chairs within that area).
  • With effect from 1 October 2012 the introduction of Note (3A) extends the above meaning to include ‘any area set aside for the consumption of food by that supplier’s customers, whether or not the area may also be used by the customers of other suppliers’.

Examples of this policy are explained further in the rest of VFOOD4500.