In the last week the ECJ has published its judgement in the joint cases of Manfred Bog, CinemaxX, Lohmeyer and Fleischerei.   This judgement is already hitting the UK press as it raises interesting questions in connection with the distinction between catering services and the supply of foodstuffs i.e. have taxpayers been erroneously accounting for VAT on their sales of takeaway or mobile food sales. Before readers rush off to buy celebratory popcorn, it is necessary to consider that the case is in relation to German Taxpayers and whether German VAT legislation was being interpreted in line with EU legislation and it cannot be directly read in to UK VAT legislation. 

In summary, under EU Law, Member States are able to introduce a reduced rate for ‘Foodstuffs’ and for ‘Restaurant and Catering services’.  The German government applies the reduced rate to ‘Foodstuffs’ but beverages and all restaurant and catering services are treated as being subject to the standard rate.  In the UK we joined the EU with a derogation to retain a zero rate for certain foodstuffs and not having adopted the reduced rate for restaurant or catering services everything falling outside of our zero rate is naturally liable to VAT at 20%.The ECJ case was primarily about whether the Taxpayers were supplying food services i.e. catering which would then be standard rated, or whether they were supplying foodstuffs which would fall within the German reduced rate.  The ECJ judgement considers that ‘foodstuffs’ includes cooked and prepared food ready for immediate consumption but that such foodstuffs will only become restaurant or catering services when there is sufficient additional provision of other service elements (such as tables, chairs, cutlery and crockery and waitressing).  It was held that the sale of hot food from Mr Manfred Bog’s market stall was not catering and, as such, he was correct in using the reduced rate for all but the beverages. Equally in the case of CinemaxX  the simple provision of a chair in the auditorium with a drinks holder, was not enough to create a provision of catering services for the food sold at the cinema kiosks. This is obviously good news for burger and food vendors in Germany. In the UK (and notwithstanding current accepted definitions) the zero rate currently excludes confectionary and beverages, as well as catering.  The UK has not adopted reduced rates for catering services, which means that anything not falling within the scope of the zero rate will be subject to VAT at the standard rate. In another food related case (‘Deliverance’), the UK Second Tier Tribunal  decision may offer further scope to UK businesses as this case hinges on the definition of  ‘hot’ food. Whilst we are still within time for HMRC to lodge an appeal, the Deliverance case was successful in arguing that a motorbike service delivering ‘freshly baked’ (and therefore warm/hot) poppadoms, naan breads, onion bhajis and samosas could zero rate the supplies. 

HMRC has not issued any comment on either the ECJ case or that of Deliverance yet and that this may not be forthcoming for several weeks.  Both cases highlight the complexity of VAT legislation relating to food and takeaway sales and our recommendations are that all businesses involved in the sale of takeaway food, food outlets, catering services or mobile food services consider what it is they are supplying.  

There has been a significant increase in the number of cases successfully challenging positions that, for example, harm fiscal neutrality. These cases provide an opportunity to consider the potential for claims relating to non-catered food.   The VAT Consultancy is working with leading advisors to develop this opportunity.  Businesses should be looking to protect their position in respect of VAT liabilities already declared and paid to HMRC.  Get in touch by email: vat@thevatconsultancy.com or call us on 01962 735350