Catering - temporary reduced rate of VAT, or not?
The temporary reduced rate of VAT for certain supplies of catering is part of the Chancellor’s package of measures to boost the economy and our waistlines.
As always, this change has highlighted some anomalies for taxpayers.
The new reduced rate Group 14 ‘Course of Catering’ applies part of the current wording of zero rate Group 1 ‘Food.’ So, the reduced rate applies for a six month period to:
Supplies in the course of catering of—
(a) any food or drink for consumption on the premises on which it is supplied, or
(b) any hot food or hot drink for consumption off those premises,
except supplies of alcoholic beverages.
The new Group also imports Note 3A from Group 1, which widens the premises to ‘any area for the consumption of food by that supplier’s customers,’ ie: seating outside.
The new Group also imports Notes 3B, 3C, and 3D from Group 1, which tries to define ‘hot food.’ These Notes go back to the introduction of the ‘pasty tax’ in 2012. HMRC say that these Notes help ensure that hot takeaway food is taxed consistently.
One area for debate remains. And that is where cold food is supplied but for a group or an event. The obvious example is a platter. It may require preparation or heating by the customer. HMRC say these supplies remain standard rated. See HMRC Notice 709/1, para 2.1 (link below). This wording seems to follow the wording of the High Court in the Cope decision  STC 532.
The same Court in Safeway Stores plc  STC 163 took a slightly different view. It commented:
“In my judgment whether a particular supply is 'in the course of catering' is a matter of fact and degree. There will be a range of factors to be taken into account by the body which is making the decision. Those factors would seem to me to include such matters as whether the food is indeed supplied in connection with an occasion or other event; the degree of preparation which remains to be carried out by the recipient is likely to be a relevant consideration, as is the presentation of the food itself—in other words, is the food in a form where one would ordinarily put it on the table with no further steps being taken? One would want to bear in mind whether crockery and cutlery are provided along with the food itself and any other of the usual ancillary items which go with a meal. Whether it is delivered, or not, by the supplier may often be a highly material factor. Whether it is served by the supplier to those eating it, at the place where consumption occurs, will also be a relevant factor.”
I would have hoped the Court might have tried further to define ‘catering,’ but it went on to say:
“I do not propose to list any more factors. The ones I have listed are not intended to be exhaustive. I recognise there may well be other considerations which will arise in the individual case. I share the tribunal's view in this appeal that no one factor by itself is likely to be decisive and it would be wrong for the tribunal to focus upon one factor in any case to the exclusion of all others. These are decisions to be made in the round, taking account of all considerations of the kind to which I have referred.
The test itself has to be an objective one: would the ordinary person regard what was being done as being 'in the course of catering'?”
The Court agreed with the Tax Tribunal that supplies of 'party trays' were not supplies in the course of catering and so were zero rated.
The present situation leaves the taxpayer with more work to do. He may make sales at one of three rates (0%, 5%, and 20%) as well as dealing with the Eat Out to Help Out initiative. If he uses the Flat Rate Scheme, there is a temporary lower percentage to be applied.
This is the link to Notice 709/1. Supplies falling within para 2.1 (according to HMRC) remain standard rated. (Or, you could be brave, and follow the Safeway Stores decision!)
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Hi, I am a VAT Consultant, part of the team at vatadvice.org We are based in Cambridgeshire. We work largely with charities but also advise a range of commercial organisations.
I have over 30 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.