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VAT Voice by Steve Allen

Steve Allen, Director of VAT Solutions (UK) Ltd, reports a Court of Appeal case on the interpretation of services in the course of catering.

Background

This was an appeal by HMRC against the VAT Tribunal decision of 6 May 2005 (19053) in favour of the appellant. The Tribunal had certified that any appeal should 'leapfrog' the High Court and go straight to the Court of Appeal as it considered that the manner in which supplies of food are made has changed so much over the years that the Court of Appeal should reassess the interpretation of the statutory expression 'in the course of catering'.

As part of a BBC policy decision in 2001 to outsource all non-core functions, the appellant took over the provision of all the catering facilities at the BBC Television Centre in Shepherds Bush. There was no dispute over the liability of supplies from the main restaurants or from vending machines, but the dispute related to the liability of the supply of cold foods from six units within the buildings, the circumstances of each of the six being slightly different; e.g. some had seating nearby whilst others did not. In particular, the disputed matters were whether supplies from the six outlets were made 'in the course of catering' and whether the food was to be consumed 'on the premises'.

VAT Tribunal

In the VAT Tribunal, the Chairman accepted that the answer was ‘no’ in both cases, and allowed the appeal.

Court of Appeal

Before the Court of Appeal, Counsel for HMRC put forward three arguments as to why the Tribunal had erred in its approach.

- that, looking at the bigger picture, Compass had contracted to supply an overall 'catering' service to the BBC in the sense of undertaking to provide high quality food to BBC personnel during specified opening hours and that the Tribunal's approach of focusing on matters such as packaging, provision of cutlery and availability of similar products from outlets in the vicinity of the Television Centre was too narrow.

- that the Tribunal's finding that, for the purposes of determining whether the food was supplied for consumption 'on the premises where the supplies were made', the premises were the immediate area of each outlet rather than the entire Television Centre was perverse and incorrect in law.

- that any zero-rating must be for clearly defined social reasons and that no such purpose could be attributed to the supply of food from the Compass outlets at the Television Centre.

- In the lead judgment, Lord Justice Mummery rejected these three arguments (although the last does not appear to be expressly addressed) and held that there had been no error of law in the decision of the Tribunal. Lord Justice Scott Baker agreed. Sir Charles Mantell agreed the 'premises' point but disagreed with his brothers on the 'catering' point (i.e. he agreed that catering could have the wider meaning argued by HMRC).

As such, the HMRC appeal was dismissed on a 2-1 majority.

HMRC v Compass Contract Services Limited – Court of Appeal, 9 June 2006

July 2006

Steve Allen
Director, VAT Solutions (UK) Ltd
Email: steveallen@vatsolutions-uk.com

VAT Solutions (UK) Ltd
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VAT Solutions (UK) Limited is an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from the Internet via their website: