Take-away food outlets and convenience stores may be able to claim VAT refunds going back four year following a decision by the European Court of Justice (ECJ), which has ruled certain food and drinks which are freshly made (including hot food) for immediate consumption should be zero rated for VAT purposes, thereby potentially bringing a tax reclaim for the supplier.
“This ruling opens the way for catering chains, snack stalls, mobile snack bars, sandwich bars, cinema foyers and others to reclaim VAT, potentially worth thousands of pounds,” said Hannah Dobson, VAT director at Smith & Williamson, the accountancy and financial services group.
“However, to maximise their claim, organisations should lodge their request as soon as possible. Retrospective VAT claims are capped at four years, so every day of delay reduces the potential reimbursement.”
According to Dobson, thousands of large and small businesses could benefit from this judgment. The growing number of outlets selling, for example, pizza slices, take-away breakfasts and hot drinks, even cinemas which sell food items such as hot dogs and nachos could be eligible for a reclaim. To qualify, the predominant element of the transaction should be about food, rather than service.
HMRC has previously argued the sale of food and drink items should be subject to VAT if they are freshly prepared and eaten on the premises, i.e. the sale is one of catering and not of food. This is the traditional ‘are you eating in or taking out question’ from most sandwich and coffee shops. Eating in meant VAT was charged.
“This ECJ decision has now questioned HMRC’s treatment,” said Dobson. “The simple provision of a table and a few chairs does not necessarily constitute (VATable) catering. Each case needs to be reviewed on an individual basis, but it does appear as if many outlets should be in a strong position to make substantial VAT reclaims. The message is simple: there is nothing to be lost from lodging a claim. If people delay or don’t pursue a claim, they could lose out.”