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HMRC internal manual

VAT Taxable Person Manual

Particular trades: Catering: Catering in membership clubs and other commercial establishments

In deciding who has made the supply of prepared food here, the fact that the staff are engaged under a contract of employment does not always provide the solution. Many institutions agree contracts of employment which specifically allow employees to indulge in catering as a sideline to their normal activities. You will therefore need to decide whether the employee is in business on his or her own account for this sideline, or whether the activities of the employee are still very much linked to the business of the employer.

a. Catering provided by stewards in clubs

Many clubs employ a steward whose duties include the provision of catering to members. We now accept that where the steward provides catering to members he does so as an independent contractor and will thus only be obliged to declare output tax if those catering takings exceed the registration threshold. The steward will, however, often pay a weekly fee back to the club - for instance to cover use of the kitchen - and the club must declare output tax on this fee.

This approach follows the decision of the tribunal in Beckenham Constitutional Club (LON/92/1037). Here the tribunal noted that the contract between club and steward did not require the steward to supply food to members, but only permitted that supply, and that therefore, the steward could not be said to be a servant of the club with regard to the provision of food.

b. Other situations

Here you will need to consider the catering activity of the employee against the four factors of control, ownership of tools, chance of profit, and risk of loss, as explained at VTAXPER34000. Indicators are as follows.

  • Control Where employees make catering supplies on their own account they will be able to set the prices for meals and devise menus; they will also be responsible for purchasing foodstuffs and for the cleanliness of the food area. Where these functions remain with the employer, this indicates that the employer is supplying the catering. Where employers keep detailed records, enabling them to determine the expenditure and takings of their employees, this is a further indication that the employer makes the supply.
  • Ownership of tools The person who owns the kitchen equipment, utensils, etc, is also likely to be the person providing the catering.
  • Chance of profit Where employees are allowed to keep the catering takings in full, this indicates that they are providing catering on their own account. Where employers demand that the takings be remitted to them, only passing money back to the employee after deductions, this indicates that the catering is supplied by the employer.
  • Risk of loss Where employees purchase their own foodstuffs, this entails a greater risk of loss and indicates that they are providing catering on their own account. Similarly if the employee is able to hire helpers, or has to pay a fixed fee for the use of the facilities irrespective of the level of business then this is also an indication that the supply of catering is by the employee and not by the employer.

You may find the following contrasting tribunal decisions helpful in clarifying the above factors.

  • In Mr M and Mrs E Barker (MAN/89/138), the tribunal considered whether the catering in a staff canteen was provided by the employer, using its employees; or whether a form of co-operative existed, under which the employees provided catering to themselves. The tribunal held that the supply of catering was made by the employer, with the supervisor in charge of the canteen acting at all times as an employee of the firm and in no other capacity.
  • National Bus Company (LON/86/622) considered whether hostesses on long-distance coaches provided refreshments to passengers on their own account, or in their role as employees of the company. In deciding that the hostesses provided the refreshments on their own account, the tribunal attached particular weight to the fact that they purchased their own ingredients, retained all profits, and were under no obligation to report their purchases or sales to the operating company.

c. Accounting consequences

In practice, the catering takings will only be subject to VAT if they are provided by the employer, since very few individuals will have takings large enough to exceed the registration threshold.