Good news for hot take-away food suppliers?
Good news for hot take-away food suppliers?
Recently there have been two decisions released by the Courts which suggest that the UK is applying the wrong VAT treatment to supplies of hot take-away food.
In the first case the Upper Tier Tax Tribunal ruled in the case of Deliverance Ltd that it was important to take into account the intention of the supplier in supplying hot-food. This seems to be the wrong way to approach the matter as it leaves us with a position where the supplier has to prove that it intended to do something, rather than looking at the basic rules for determining the VAT treatment.
In the decision released last week on several cases referred to it by the German authorities it is clear that the correct view is to consider whether the supply being made is of goods (i.e. food) or services (i.e. catering). In the German cases many of the taxpayers were making supplies from kiosks or stands in public areas. The ECJ decision indicates that where there is little or no additional supply, other than hot-food, the supply is one of goods. In the instances referred to the ECJ by Germany the supplies were, as goods, eligible for a reduced rate of VAT.
How might this apply in the UK?
That is a very good question to ask!
It is clear that the simple approach of looking at whether the supply is of goods or services might provide one way of applying the ruling of the ECJ. The difficulty arises from how HMRC might approach the issue. I’ll avoid commenting on that further here as I’m sure HMRC need no help from me in considering its position – although if they ask I’ll happily answer!
The upshot of all this is that there might be a change to the current rules that would make supplies of hot take-away food zero-rated. If that happens it will be good news for Fish and Chip shops, and other take-away outlets, as it is likely to see them able to reduce their prices.
What’s your view? Leave a comment below.
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And good news for my butcher too for the handful of hot pies he sells, it sounds like he may not need to individually track them to account for VAT??
Wow! I’ve only just posted that Alastair.
I think we’ll have to wait for HMRC to comment before anyone can claim that it is really good news!
If HMRC accept the ECJ decision and implement it, there’ll be a lot of taxpayers like your butcher who will benefit – as will their customers.
Cheaper fish and chips sounds nice.
In the meantime, I’m looking forward to some cheaper ‘Bratwurst & Pommes’ when next in Germany
I think there’ll be no change to the price of Bratwurst & Pommes as the firms involved in the case were already selling at the reduced rate of VAT.
I always think that fish and chips are nice. They’ll be nicer still if they are ‘tax free’!!
No Doubt HMRC will challenge this but in the meantime if I submit a reclaim of VAT on a 652 Voluntary Disclosure will this be subject to a mis dec penalty?
A voluntary disclosure falls outside the misdeclaration penalty rules. It is likely to be challenged by HMRC so you need to be prepared for the hassle that will ensue if you submit a voluntary disclosure. You could submit a protective claim. Ultimately you may have to choose between accepting HMRC’s decision or appealing against it.
It is probably best to wait until HMRC issue some guidance on the matter.
I am just setting up an event catering business where we will be selling hot food over the counter to music festival goers. Our first event is in the next few weeks. Should I proceed as if my goods are standard rated or zero rated, in your opinion?
Jon, my advice is to proceed as if your supply is standard rated unless you have very deep pockets and would be prepared to pursue the issue through the Courts. At the moment it is difficult to see HMRC approving any change in the VAT treatment of hot take-away food.
Robert
I run two burger take aways, in 1984 VAT at the standard rate became due on our hot food. Since then the sandwich operators and ready meals have enjoyed zero rating which is unfair. I think its about time the “Hot” penalty is dropped so we can compete on a level playing field.
The National Federation of Fish Friers in conjunction with KPMG are inviting their members to support an initiative from KPMG for a zero rate on hot takeaway food.
The NFFF are also seeking to persuade HMRC to create a level playing field between fish shops and supermarkets on the sale of hot food. There is a huge inequality in that food from a fish and chip shop is subject to standard rate whereas the same food from supermarkets eg hot chicken is zero rated.
Martin
I had no idea that KPMG were involved in anything like this. It is very interesting that they are. It means that their VAT specialists believe there to be some chance that the UK’s rules will be changed. I wonder whether any other national organisation is taking similar steps?
Robert