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HMRC internal manual

VAT Partial Exemption Guidance

Other Partial Exemption issues: free supplies of catering

Where an employer provides food or beverages free of charge in the course of catering to its employees, the value of the supply is always taken to be nil unless the supply is for a consideration consisting wholly or partly of money. In that case the value of the supply is determined only by the monetary consideration (paragraph 10 of Schedule 6 to the VAT Act 1994). Even if no charge is made to the employees, the employer is still making a taxable supply albeit for nil consideration. Any input tax incurred by the employer which is directly attributable to that supply is, therefore, fully recoverable.