Oils and fats used for animal food is zero-rated, unless it is waste oil from a fish and chip shop – which is standard rated… even if it is used to feed animals.
Tag Archives: vat-food
VAT: When is a bar a bar? – The Anglia Ruskin Students’ Union case
Latest from the courts
A student union tried to argue that a bar is not a bar. It did not go well.
In the case of The Anglia Ruskin Students’ Union the High Court considered the appellant’s application for judicial review of HMRC’s decision that “92” which was operated on the university’s campus was a bar.
The importance of this description of the venue was that if it was indeed a bar, the supplies from it would be standard rated. This is because the supplies of catering to students by eligible bodies, including universities”, are exempt from VAT, on the basis that the supplies are closely related to exempt supplies of education, however, the exemption does not cover food and drink sold in bars.
The union contended that ‘bar’ means a place that does not supply catering, or, alternatively, predominantly or mainly serves alcohol.
HMRC, predictably argued that a bar is “somewhere where one can buy and drink alcoholic and other drinks, as well as food”, and that 92 met that definition.
The court agreed with HMRC that the bar was indeed a bar and did not grant permission to appeal.
So, now we know, a bar is a bar, not a café… or anything else really.
Technical
* Student unions often provide catering alongside universities. Since March 2002, HMRC has operated a published concession extending the exemption granted to supplies of catering made by universities to student unions.
A VAT Did you know?
In or out?
If a biscuit is covered, even partially, in chocolate the VAT is 20%, but if the chocolate is inside, say a choc chip cookie or a bourbon, it is VAT free.
A VAT did you know?
If you buy a flapjack* from a vending machine in the corridor at work it is VAT free. However, if you buy the same product from a machine in the staff canteen it will be standard rated.
* Of course, zero rating only applies to a “traditional” flapjack and not cereal or energy/sports nutrition bars…
A VAT Did you know?
Fruit pulp is zero-rated, but fruit juice is standard-rated.
VAT: Zero rated “hot” food – a summary
Generally, cold takeaway food and drink is zero-rated (as long as it is not of a type that is always standard-rated, such as crisps, sweets and some beverages including bottled water).
Via VAT Act 1994 Schedule 8, Group 1, the sale of certain food is zero rated. However, there is an exception for supplies in the course of catering. Anything coming within the definition of catering reverts to the general rule and is taxable at the standard rate. The definition of catering includes “any supply of hot food for consumption off those premises…” Note 3 (b).
Historically, there has been many disputes over what food is “hot”. A seemingly straightforward definition one would think, but this is VAT, and case law insists that that is often not the case. A good example is the Eat case.
It may be coincidence, but I have dealt with a number of issues around this recently, so I thought it may be helpful to look at the VAT treatment of different types of food.
Pasties, sausage rolls, pies or other pastries
- If they are hot and straight from the oven: Although the pastry is hot, it is not being kept warm, so therefore there is no VAT
- Left to cool to room temperature: The pasty is not being kept warm, so no VAT is chargeable.
- Kept hot in a cabinet, on a hot plate or under a heat lamp: The pasty is being kept warm so VAT is due
Sandwiches
- Cold food is zero-rated for tax purposes so no VAT.
- Heated for a customer – standard rated per the Eat case.
Bread
- Freshly baked, cooling or cold – the bread is not kept warm, even though it may be straight from the oven, so would be VAT free.
Rotisserie chicken
- If hot from the spit; VAT on takeaway food intended to be served hot is VATable.
- Kept hot in a cabinet, on a hot plate or under a heat lamp – As the food is kept hot and served hot, VAT is applicable.
- Left to cool to room temperature – If the chicken is cooked then left to cool, such as in bags in a supermarket, it will be VAT free.
Takeaways
- such as fish and chips: VAT remains on all takeaway food served hot.
Catering
- All supplies of catering is subject to VAT regardless of what food and drink is being provided. This includes all restaurants and cafés: VAT applies if a supply of food and drink is made for consumption on the premises that it’s supplied in.
This is a general guide and, as case law shows, there will always be products on the “borderline”.
In summary, food that is hot can be treated as cold…
A VAT Did you know?
The Irish Supreme Court ruled that the bread sold by the restaurant chain Subway was too sweet to be classified as bread and that the high sugar content meant that it could not be zero rated.
A VAT Did you know?
Toffee apples are zero-rated, however, any other fruit which is covered in sugar (or toffee) sold as confectionary is standard rated.
VAT: More on separate and single supplies. The KFC dip pot case
Latest from the courts
In the First-Tier tribunal case of Queenscourt Limited the issue was whether dip pots supplied as part of a takeaway meal deal are a separate zero-rated supply (of cold food) or whether they are part of a single VATable supply of hot food.
Background
The appellant had originally accounted for output tax on the basis that dip pots formed part of a single standard rated supply with other food. However, following advice, it then formed the view that zero-rating applied to these pots and submitted a claim for overpaid output tax. HMRC agreed to repay the VAT claimed.
Subsequently, a further claim as made on a similar basis for a later period. This was considered by a different officer who refused to make the repayment on the basis that there was no separate supply of the dip pots. This called into question whether the payment of the initial claim was correct. The officer considered the previous repayment to have been incorrect and issued assessments in order to recover the amount which had been repaid.
Queenscourt now appealed both against the decision to refuse the repayment claimed in the second error correction notice and also against the recovery assessment relating to the first error correction notice. Moreover, the recovery assessments are invalid as there has been no change in circumstances and no new facts have come to light since HMRC agreed to repay the tax. Alternatively, it argues that HMRC are prevented from recovering the tax, either on the basis of legitimate expectation or estoppel by convention, in each case arising as a result of HMRC’s original agreement that that tax should be repaid.
Decision
The appeal was dismissed.
- On the dip point issue, the FTT stated that it was unlikely the dip would be eaten on its own, or as an end in itself, unlike the coleslaw or cookie elements – It is a means of better enjoying the hot food. Consequently, it is an element of a standard rated single composite supply of hot takeaway food.
- Legitimate expectation – Whilst the Tribunal did have jurisdiction to consider arguments based on legitimate expectation in the context of an appeal against a recovery assessment, it is not in this case sufficiently unfair for HMRC to resile from their initial acceptance of the claim made in the first error correction notice and to apply the correct tax treatment.
- Estoppel – HMRC is not estopped from making or relying on their recovery assessments as there has been no detrimental reliance on the original position taken by HMRC in connection with any subsequent mutual dealings.
Commentary
It is difficult to see the end of single/multiple supply cases, as my previous articles consider:
Here, here, here, here, and how to categorise a supply here.
A VAT: Did you know?
Banana and strawberry flavoured Nesquik drinks are standard rated, but chocolate flavoured Nesquik is zero rated.