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Bog standard - change in VAT rules on Take Away Food?

Most food products are subject to the zero rate of VAT. By contrast, the service of "catering" is subject to VAT at the standard rate of 20%. So much is clear. But there has historically been controversy about exactly where the dividing line falls: the UK courts are littered with the discarded packaging of catering cases. However, a recent ECJ case (Finanzamt Burgdorf v Manfred Bog) suggests that the answer may be very much simpler – is what the customer is buying essentially just food (usually zero-rated) or is he really buying a service which includes food as an element of the overall service (standard rated)? On this basis, fine distinctions about whether food is consumed on or off the premises and whether hot or cold fall away and it becomes easy to distinguish (for example) a takeaway food outlet (which is selling zero-rated food and minimal if any service) from a fine dining establishment, where the offering (and the price) owes more to the service of providing ambience and obsequiousness than to the ounce or two of comestibles looking lost and lonely on an expanse of fine china and which remains standard-rated.

It is of course highly unlikely that HMRC will decide overnight that the current UK VAT zero-rating rules are too narrow and change them: more likely they will aim to explain why UK law is consistent with the ECJ decision and change nothing. However, given the potentially large sums in question it seems likely that it is only a matter of time before some major player in the industry will decide to take a case against HMRC, which is likely to end up before the ECJ.

If you may be affected (principally businesses providing food with minimal related service elements such as take-away restaurants and other food outlets) but your pockets are not quite deep enough to litigate it may still be worth submitting a protective claim to HMRC. Although it may take some years for the UK VAT position to be settled, in the event of a successful outcome businesses who submit claims now will ensure that they do not lose money as VAT periods go "out of time".

If this sounds like you and you wish to consider a claim, please contact us.