United Kingdom
14 March 2011- Hot food: ECJ serves up an important ruling
The European Court of Justice (ECJ) has given a potentially significant ruling on the VAT treatment of hot food supplied for consumption off the vendor's premises.
The decision could affect not only a huge number of restaurants, cafes and take away businesses which supply hot food (and drinks) for consumption elsewhere, but potentally also other businesses which supply hot food in-house, where this is not eaten in a canteen. Affected businesses need to decide whether to make a repayment claim for VAT which they may have accounted for over the past four years, and how to treat their sales going forward, in light of the decision.
The ECJ judgment (in respect of several joined German cases) is that the supply of food or meals freshly prepared for immediate consumption from snack stalls, mobile snack bars or cinema foyers is a supply of goods, if any service element is incidental. The provision of a counter (as opposed to tables and chairs) at which customers can eat the food was not seen to make a supply of hot food a service.
The significance of this type of supply being classed as a supply of goods is that the zero rate of VAT applicable to foodstuffs could apply, rather than the standard rate in respect of catering services.
HMRC has not yet indicated how it will proceed following the ruling, so businesses need to review their own circumstances and decide what action to take.
Please contact Steve James or Michael Ashdown for further information, assistance with any repayment claim or advice on the VAT treatment of future supplies.