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HMRC internal manual

VAT Taxable Person Manual

Particular trades: Catering: Catering contractors in non-commercial establishments operating as a principal and as an agent

In some cases (as in the PBK Catering case referred to in VTAXPER64200) the caterer will claim to be a principal in the purchase and resale of consumables to the client and then act as an agent of the client in the preparation and service of the food. This is particularly attractive to clients who are unable to fully recover the VAT they are charged. Rather than being treated as further consideration for the contractors services, it means that the value of any discount represents the mark-up when the consumables are invoiced on to the client. They are therefore only liable to VAT to the extent that the consumables themselves are standard rated.

Where this is claimed to be the case you should expect it to be explicitly set out in the agreement that such a relationship exists between the caterer and the client. It also needs to be clear at what stage the transfer of ownership of the consumables from the caterer to the client actually takes place. If it is not, then the caterer is unlikely to be acting as both principal and as an agent.

When you have established which of the above situations applies, consult section 5 of Notice 709/1 for a detailed explanation of the accounting and invoicing consequences:

  • Paragraphs 5 to 7 explain these consequences for catering in factories, offices and other workplaces.
  • Paragraphs 9 to 11 explain these consequences for catering in hospitals, clinics and nursing homes.
  • Paragraphs 13 to 15 explain these consequences for catering in schools, universities and colleges.