| HMRC Reference:Notice 709/1 (November 2011) | View Change History |
1. Catering and take-away food
1.1 What is this notice about?
1.3 How do I decide whether my supplies are in the course of catering?
2.1 What is the ordinary meaning of catering?
2.5 Aircraft, ships, trains and other means of transport
2.6 Schools, universities, colleges, etc
2.7 Hospitals, clinics, nursing homes, etc
3.1 Why is the concept of ‘premises’ important?
3.3 Evidence and apportionment
4. Hot take-away food and drink
4.1 What is the liability of take-away food and drink?
4.2 What is take-away food and drink?
4.4 What about freshly cooked products?
4.5 What do we mean by ‘specifically sold for consumption whilst still hot’?
4.6 What happens if I provide a microwave oven for my customers to use?
4.7 What about hot and cold ingredients supplied as a single item of food?
4.8 What happens with hot and cold food sold at the same time?
5.1 Catering provided by the owner of the catering facilities
5.2 Catering provided by a catering contractor acting as principal
5.3 Catering provided by a catering contractor acting as agent
5.4 Catering provided by a catering contractor acting as both principal and agent
5.5 Catering provided by student unions in universities and other higher education establishments
5.6 Retail scheme calculations
5.7 Meals supplied free of charge
5.8 Catering for family or employees
Do you have any comments or suggestions?
This notice cancels and replaces Notice 709/1 (February 2007).
Although the supply of most food and drink of a kind used for human consumption is zero-rated, there are exceptions. Some items are always standard rated and these are explained in Notice 701/14 Food. Other supplies are standard rated because they are made in the course of catering. This notice will help you decide whether or not your supply is one of catering.
This notice has been updated to provide clarity and specifically Sections 2, 4 5.
It is intended for all those who prepare and supply food and drink ready for consumption.
To do this you must ask yourself the following questions in this order.
Ask yourself |
Further information is in section | |
|---|---|---|
1 |
Is it within the ordinary meaning of catering? |
2 |
2 |
Is it for on-premises consumption? |
3 |
3 |
Is it hot take-away food? |
4 |
If the answer is ‘yes’ at any stage your supplies are standard rated supplies in the course of catering. However, if you make the supply at a hospital, school or similar establishment, you must refer to section 2.6 as your supply may be exempt.
Catering in its ordinary meaning includes the supply of prepared food and drink. It is characterised by a supply involving a significant element of service. Obvious examples of supplies in the course of catering include:
Examples of supplies that are NOT in the course of catering:
Any supply of food and/or drink as part of a contract for catering is standard-rated.
However, a contract that merely entitles a food retailer to occupy a set of premises from which they make their supplies does not automatically determine that a supply is one of catering. In these instances it is important to consider all of the activities being carried out.
If you supply food that your customers must prepare themselves before it can be consumed, this is not a supply in the course of catering. This will apply whether the food is delivered to, or collected by, your customers.
If you make a charge for delivery you should read Notice 700/24 Postage and delivery charges.
For these purposes, ‘preparation’ includes:
If you take sandwiches, or other items of food and drink, to buildings in order to sell them, but have no contract or agreement to do so, this is not a supply in the course of catering and you can zero-rate any item that is eligible (see Notice 701/14 Food for further details).
However, if you are supplying the food under a contract, for example to cater for an event, you are making a supply in the course of catering and all your supplies will be standard-rated.
If you make a charge for delivery you should read Notice 700/24 Postage and delivery charges.
Provided these items are in the same form as when sold by a grocer or supermarket, and are clearly not intended for on-premises consumption, you do not have to treat them as being made in the course of catering.
Examples of items that are clearly not intended for on premises consumption include packets of tea, packaged coffee granules, powder, beans etc, sugar, loaves of bread and cartons of factory sealed milk.
Where you provide packed meals as an incidental to an event or a function, such as for coach parties or race meetings, the meals are supplied in the course of catering and should be standard-rated.
If you run a hotel or similar establishment and you supply bed and board (including packed meals) at an inclusive price, you should treat the whole supply as standard-rated. Where however, you supply a packed meal over and above your supply of accommodation and a separate charge is made, then provided it is for consumption off your premises, it can be zero-rated (apart from any items that are always standard-rated - see Notice 701/14 Food).
If you make a service charge, it is standard-rated. But if the customer freely gives a tip above your total charge, no VAT is due on the tip.
Vending machine supplies follow the same general principles as food and drink supplied from catering outlets. In other words:
If the vending machine is on a university campus and is run by the students’ union you will need to read section 5.5.
If you make a separate supply of catering on board an aircraft, ship, train or other means of transport, it is standard-rated unless it is provided for consumption during a journey from the UK to another EU Member State or on a journey to a country outside the EU.
If you supply passenger transport or cruises you will need to refer to Notice 744A Passenger transport and Notice 709/5 Tour operators’ margin scheme.
Certain supplies of education, training and research are exempt from VAT. Where an educational institution provides exempt education to its own pupils and students, then the supply of catering they make is also exempt. If the supply of education is non-business, as in the case of a local authority school, free school or academy school, the supply of catering will also be non-business, provided it is made at, or below, cost. See Notice 701/30 Education and vocational training for more information.
Whichever treatment is appropriate it applies to anything provided by way of catering. This includes food supplied at mealtimes and break times from the refectory, canteen or other similar outlet but not items purchased from a university campus shop, as they are not provided by way of catering.
Food and drink supplied at or below cost from a tuck shop run by the school itself takes on the same liability as the education.
You cannot normally deduct input tax incurred on costs that relate to exempt supplies. Further information can be found in Notice 706 Partial Exemption.
You must account for VAT on supplies of catering to staff and visitors (except visiting students).
If you are a student union, supplying catering both on behalf, and with the agreement, of the parent institution, you will need to read section 5.5.
Care provided in a hospital or other statutorily registered institution is exempt from VAT. This exemption includes the supply by such institutions of prepared food and drink directly to their patients in the course of care.
Supplies of catering to other persons such as staff and visitors are not exempt and you must account for VAT on such sales.
You cannot normally deduct input tax incurred on costs that relate to exempt supplies. Further information can be found in Notice 701/31 Health and care institutions and Notice 706 Partial exemption.
You must always charge VAT at the standard rate if you make a supply of food and drink for consumption on the premises on which it is supplied - see also section 1. Also, you must charge VAT at the standard rate if you supply hot take-away food (that is, hot food for consumption away from the premises where it is sold).
It is, therefore, important to know what ‘premises’ means as there will be times when it is not just the outlet where your business is situated.
For the purposes of Group 1 of Schedule 8 of the VAT Act, ‘premises’ are the areas occupied by the retailer and/or, those areas which have been specifically provided for the customer to consume the food purchased.
Examples of premises:
‘Premises’ will also include any areas of chairs and tables contained in delineated areas which are not immediately adjacent to the retailers outlet but are still situated within the vicinity of the outlet and are designated for the use of the retailers’ customers. It does not include genuine areas of chairs and tables for general communal use which are not the responsibility of the caterer/retailer.
Where you make sales of cold food to be taken away from your premises, but also have on-site facilities where food can be consumed, you will need to apportion your sales of cold food between those consumed on the premises (standard-rated) and those taken-away (zero-rated).
If you are unable to ascertain the correct liability at the point of sale (see 5.6), you must retain satisfactory evidence to support a fair and reasonable apportionment. Records, and the retention of records, are explained in VAT Notice 700 and Notice 700/21 Keeping records and accounts.
Hot take-away food that has been heated for the purposes of supplying it hot is always standard-rated. Cold take-away food and drink is zero-rated, provided it is not of a type that is always standard-rated (such as crisps, sweets, beverages and bottled water).Hot drinks are standard rated. Further information can be found in Notice 701/14 Food.
Take-away food is food sold for consumption off premises. Section 3 explains what we mean by ‘premises’.
Hot in this context means above the surrounding air temperature.
Examples of standard-rated sales when sold hot are:
If you sell freshly cooked products for consumption while they are still hot they are standard-rated, see paragraph 4.5.
Some of these products are, however, not sold with such an intention They may only be hot/warm as they are in the process of cooling down. Examples include pies, pasties, sausage rolls and similar savoury products, cooked chickens or joints of meat, bread products and croissants. The liability will depend, therefore, on how you prepare and sell them.
If they are sold |
they |
|---|---|
specifically for consumption whilst still hot (as a result of being freshly prepared, baked, cooked, reheated or kept warm) |
will be standard-rated. |
warm simply because they happen to be freshly baked, are in the process of cooling down and are not intended to be eaten while hot; or |
can be zero-rated |
You sell food specifically for consumption whilst still hot if you either:
It does not matter where you sell the food - if it is for consumption while still hot, it will be standard-rated. This means that hot take-away food sold in supermarkets, kiosks at airports or stalls at train stations, etc, are all subject to the same rules.
If you sell food to be taken away for consumption elsewhere, but you make a microwave oven available for your customers to heat up the food, either before or after the till point, you are making a supply of hot food which must be standard-rated. This is the case whether or not you make a charge for the use of the oven.
If you sell hot food with an ingredient that is cold as a single item, the whole supply is standard-rated. This is includes anything in a bun, bap, baguette or other speciality bread with any hot filling such a sausage, reheated cheese and ham, pastrami, etc. Some examples are:
If you sell a mixture of standard-rated and zero-rated items for an inclusive price for consumption off the premises, you will have to work out the tax value of each item in order to calculate how much VAT is due on the standard rated item. You can do this on the basis of cost or market values as explained in Notice 700 The VAT Guide.
Examples of mixed supplies of take-away food include:
You are normally considered to be making mixed supplies if each of the items in the inclusively priced package can be purchased separately from your menu. This is not the same as the single item of food that happens to have a cold ingredient for which one charge is made as explained in paragraph 4.7.
Ignore any minor items for which you make no charge such as salt, pepper, vinegar, mustard etc.
This applies whether or not the customer uses the condiments on the food.
If you run your own catering outlet you are acting as principal. This means that you must account for VAT on any supplies of catering or hot take-away food. You can reclaim any VAT charged to you as input tax, subject to the normal rules.
If you are a catering contractor running catering facilities on someone else’s premises as a principal, you must account for VAT on:
You must account for VAT on your supplies even if the owner of the facilities makes exempt supplies (see paragraphs 2.6 and 2.7).
Although you run the canteen etc, the food and drink is supplied by the owner of the catering facilities - your principal. The owner must therefore account for VAT on the supplies of catering or hot take-away food (unless they make exempt supplies as in paragraphs 2.6 and 2.7).
The following explains how you should treat invoices, your fee and your profit and loss account as an agent. For more information regarding invoicing in these circumstances see Notice 700 The VAT Guide.
(a) Invoices made out to your principal: if you buy goods or services for your principal and they are invoiced to him, the supplier should send the invoices direct to your principal, who can reclaim the VAT subject to the normal rules. You should show a VAT inclusive amount against the purchase of the item in your profit and loss account.
(b) Invoices made out to you: if you buy goods or services for your principal and they are invoiced to you, you should re-invoice them to your principal and account for VAT on them. If you buy goods or services from unregistered suppliers, you must be aware that you will have to charge VAT where appropriate. You can reclaim the VAT on the invoice subject to the normal rules (see Notice 700 The VAT Guide).
Provided you issue a separate tax invoice for these goods or services when you charge them on to your principal, you should merely record the VAT inclusive amount in your profit and loss account. However, if it is your normal practice to issue a single document to serve as both the tax invoice and the profit and loss account, you must clearly show the dual purpose of the document and keep the tax invoice details separate from the other information.
(c) Your fee for your services to your principal: you must account for VAT on the fee you charge for running the catering facilities. The canteen owner can reclaim the VAT you charge subject to the normal rules.
(d) Profit and loss account: if you provide the canteen owner with a profit and loss account, you must show the VAT inclusive amounts spent on food and received from supplies of meals. If there is a profit that you pay to the canteen owner or you are reimbursed by him for any loss, these amounts are outside the scope of VAT.
If you supply food and drink to the owner of the catering facilities and then you prepare and serve it to the users of the canteen etc, on the owner’s behalf, you are acting both as a principal in your own right and as an agent of the owner. You must account for VAT on both:
Although under these arrangements you run the canteen, you are supplying the food and drink to the canteen owner and the owner supplies the food and drink to the users of the canteen. The owner must therefore account for VAT on standard-rated supplies of catering and hot take-away food, unless they make exempt supplies as in paragraphs 2.6 and 2.7.
If you are a student union and you are supplying catering (including hot take-away food) to students both on behalf, and with the agreement, of the parent institution, as a concession you can treat your supplies in the same way as the parent institution itself. This means that you can treat your supplies as exempt when made by unions at universities, and other institutions supplying exempt education, and outside the scope of VAT when supplied at further education and sixth form colleges.
This means that most supplies of food and drink made by the union, where the food is sold for consumption in the course of catering (see sections 2 and 3 above), will be exempt. For example, food and drink sold from canteens, refectories and other catering outlets (excluding bars), plus food and drink sold from vending machines situated in canteens and similar areas.
However, it does not cover food and drink sold from campus shops, bars, tuck shops, other similar outlets and certain vending machines (see 2.4 above). Further the concession does not cover any other goods or services supplied by the student unions.
If you cannot use the point of sale scheme as outlined in Notice 727/3 Retail schemes: How to work the point of sale scheme, you may be eligible to use the catering adaptation detailed in Notice 727 Retail schemes.
If you give your customers or friends free meals or drinks, this is regarded as business entertainment and you will not be entitled to deduct any input tax incurred in the provision of the meal or on the purchase of the drinks.
However, where you provide free sweets or drinks as part of a meal your customer pays for, such as mints or liqueurs with the bill, you may treat this input tax as attributable to the taxable supply of the meal.
If you give meals or drinks in exchange for an identifiable benefit to your business, for example to coach drivers or to group/party organisers in return for bringing their party to your establishment, you can deduct any VAT incurred but you must account for output tax on the cost to you of these supplies.
If you are the proprietor of a restaurant, café or other catering establishment and you supply yourself or your family with meals, this is not regarded as catering and you need not account for VAT on those meals. However, you must account for tax on the full cost to you of any standard rated items (such as ice cream, sweets and chocolates, crisps, soft and alcoholic drinks - see Notice 701/14 Food) that you take out of your business stock for your own or your families use.
If you provide catering to your employees and they are not required to make any payment, no VAT is due. The same applies if deductions are made from gross wages where this is provided for in a contract of employment.
Similarly, if you install vending machines for your employees to use free of charge and you give them tokens to operate the machine or it is operated without tokens or coins, no VAT is due on the supplies from the machine. But if you give your employees money, or they have to pay for tokens to operate the machines, the supplies are standard rated and you must account for VAT on them.
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If you have any comments or suggestions to make about this notice, please write to:
HM Revenue & Customs
VAT Liability Team
VAT Products and Processes
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London
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