Compass, the caterer, has won a key judgment on the VAT treatment of in-house
catering facilities that could see employers recovering tens of millions of
pounds of tax on employees’ sandwiches.
The case could also see sandwiches, which are provided at in-house
facilities, offered more cheaply, advisers have suggested.
The Court of Appeal ruled earlier this month that supplies made by Compass to
the BBC in respect of catering outlets at Television Centre were not subject to
Cold food is zero-rated for the purposes of VAT, but food provided ‘in the
course of catering’ is not. HM Revenue & Customs argued that the food
Compass provided was a catering contract rather than the simple provision of
Frank Sangster, an indirect tax partner at KPMG, said: ‘I have one client
with four to six thousand employees who have a claim for £2-3m. It is a case
that spans across industry groups.’
It was unclear, however, who would benefit from the repayments. Sandwich
prices at catering facilities would be likely to be subsidised anyway under set
pricing structures, meaning that if the case is won, it might only make it
cheaper to provide the sandwiches, Sangster said.
The Court of Appeal ruled two to one in favour of Compass in the case, with
repayments of tax paid likely to go back over three years.
The court rejected the argument that there was any difference between the
sandwiches being supplied by Compass in this situation and those supplied by
‘When supplies of sandwiches are made at the Compass food outlets the
individuals to whom the supplies are made obtain nothing more than, and nothing
different from, what could be supplied in another part of the BBC Television
Centre, such as the newsagents located in the building, or close by in the High
Street supermarket or sandwich shop.
‘Viewed objectively the supplies of sandwiches made to individual customers
are not ‘in the course of catering’. The individual customers are simply buying
and being supplied with sandwiches in the same way as if they were buying them
and being supplied with them zero rated from another available retail outlet.
‘It makes little sense that they should be made liable to pay VAT in the one
case, but not in the other,’ Lord Justice Mummery, one of the appeal judges,
A spokesman for HMRC said that it had not yet made a decision whether or not
to appeal the case.
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