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TAX NEWS: Compass Contract Services wins VAT appeal. By Nichola Ross Martin

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19th Jun 2006
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Compass Contract Services UK Ltd has won the latest round in its VAT case to determine that its supplies of take-away sandwiches to the BBC are zero and not standard rated.

The court found by a majority that food supplied by the company to the broadcaster was not a supply "in the course of catering".

This case has implications for many takeaways, particularly those who are housed within a larger business premises, and or have contractual arrangements to provide cold take away food.

Background
Compass, which is the largest food service organisation in the world, makes supplies of sandwiches (as well as other items of hot and cold food and drinks) to customers. These include thousands of BBC employees and visitors to the BBC Television Centre, where Compass runs 6 retail outlets located in 4 principal buildings at the BBC Television Centre. The wide range of services covered by the Compass contract include a self-service restaurant, food bar "deli-bar" style service, a beverage vending service and a hospitality service for meetings, conferences and events.

HM Revenue and Customs main points:
1. All supplies of food by Compass at the retail outlets at the BBC Television Centre were "in the course of catering" because Compass contracted to supply catering services for the BBC at the outlets there. It was a "unitary obligation" on the part of Compass to provide fresh high quality hot and cold meals during "normal operating hours." The exception to zero rating is not confined to the place of the supply of food or to the condition of the food supplied. The wider context of the circumstances in which, and the nature of the obligations pursuant to which, the supplies of food take place, are relevant. The catering contracts colour the context of all the supplies of food by Compass at the BBC Television Centre.

2. The relevant "premises" for determining whether the sandwiches in question were supplied for consumption "on the premises where the supplies were made" were the entire BBC Television Centre, not just the particular retail food outlets at which Compass made the supplies.

In the "course of catering"
The court found a distinction between contract catering where food is provided at an event, for usually a set number of people and that supply is then without any doubt in the "course of catering". A supply of catering where cold food packaged in the same way they are presented in high street shops is not in the "course of catering". The former is standard rated and latter is zero rated which therefore applies when cold food is supplied from one of the six Compass retail units within the BBC Television Centre. The food was supplied by way of 'takeaway' for consumption in other parts of the building or elsewhere.

Premises
As a supply in the course of catering includes any supply of it for consumption on the premises on which it is supplied. This point needed to be addressed fully. The court agreed that 'premises' could not extend beyond the premises that Compass had direct control over. Therefore even though seating was provided near the retail outlets by the BBC, and Compass looked after and cleaned this furniture, it was not included by the term premises. That was limited to the premises which Compass itself controlled.

The case "leapfrogged" from the VAT Tribunal to the Court of Appeal. HMRC is expected to petition for leave to appeal against this decision to the House of Lords.

Full transcript: Compass Contract Services UK Limited v. HMRC [2006] EWCA Civ 730

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