Was Eat Ltd supplying “hot” food liable to VAT at the standard rate, or was it supplying “fresh” muffins and ciabatta products chargeable at the zero rate? This follows numerous VAT cases on the topic of hot and cold food. The appeal was dismissed by the First-tier Tribunal (FTT).
This case concerned an appeal by Eat against a decision by HMRC that supplies of breakfast muffins and grilled ciabatta products were liable to VAT at the standard rate.
The VAT legislation is set out in the zero-rating schedule i.e. VATA 1994, Schedule 8, Group 1 – Food. This group is complex and lists general items where zero rating applies i.e. food for human consumption; then lists “excepted items” i.e. a supply in the course of catering; and then items which override the excepted items – requalify to be zero-rated for VAT e.g. tea. Confusing to say the least!
This case was initially stood behind the Court of Appeal decision in the case of Sub One Limited (t/a Subway) (in liquidation) v HMRC . The decision handed down in 2014 in this case was that the supplies of sandwiches and marinara had been heated to allow them to be consumed at a temperature above the ambient air temperature. Accordingly, standard rated VAT was to apply.
In this decision, it was held considering EU law that the “purpose” test was to be determined objectively as opposed to subjectively. Accordingly, it was down to the Tribunal to decide Eat’s and its customers’ intentions when buying the muffins and ciabatta products.
For Eat to succeed in its appeal, it must be confirmed that it was not the intention for the muffins and ciabatta products to eaten “hot”. For these purposes, they are considered “hot” when:
- They are heated to enable them to be consumed at a temperature above the ambient air temperature; and
- They are above that temperature at the time they are provided to the customer.
It was agreed between the parties that the products were above the ambient air temperature when supplied to customers. However, it was necessary for the FTT to ascertain whether the products were heated to allow them to be consumed above the ambient temperature.
Eat’s submission was that the common intention of the parties was that the products were to be finished off as being “fresh” rather than partially complete.
HMRC’s case was that “the customer either wants hot food or does not. Either the supplier proposes to supply hot food, or it does not.”
The FTT judge stated that it was a “hopeless appeal by Eat” and that he had no hesitation in finding that the products were standard rated. He further commented that this is different from a case where pies are baked on retail premises, and customers could purchase them before they were fully cooled:
“Eat’s products were not racked to be allowed to cool”
The final nail in the coffin was that the products were wrapped in foil-backed sheets to keep them warm!
Who is potentially affected?
This case is relevant to:
- Any outlets that provide similar food products to those discussed above
- Any outlets looking to obtain zero rating for their products
We can advise on what the rules are concerning VAT. This will boil down to the exact facts of the relevant transactions.