HM Revenue & Customs v Compass Contract Services UK Ltd

Whether a food supply is made “in the course of catering” is an objective question of fact and degree. The examples in Note (3) to Group 1 of Schedule 8 to Value Added Tax Act 1994 aid interpretation but are not exhaustive. Relevant circumstances include whether food forms part of a broader activity with an additional element of service or facilities, and the place and condition of the food. No single factor is decisive. A supplier’s contract to provide catering services to a third party does not, by itself, convert ordinary retail sales of cold food for consumption elsewhere into catering supplies.

Customs determined that cold prepared food supplied by Compass at six retail outlets in the BBC Television Centre was standard-rated because it was supplied “in the course of catering”. The Manchester VAT and Duties Tribunal allowed Compass’s appeal, holding that the supplies were not made in the course of catering and were not for consumption on the premises of the outlets. The Tribunal certified a direct appeal on the construction of Value Added Tax Act 1994. The Court of Appeal had to determine the scope of the catering exception and whether the relevant premises were the individual retail units or the wider Television Centre.

By a majority, the appeal was dismissed. Mummery LJ and Scott Baker LJ held that the Tribunal had made no error of law. Sir Charles Mantell LJ dissented and would have allowed the appeal.

1. The statutory scheme makes supplies of food generally zero-rated, subject to exceptions including supplies in the course of catering. Note (3) to Group 1 of Schedule 8 to Value Added Tax Act 1994 is illustrative rather than exhaustive. It is an aid to interpretation and highlights the significance of the place of consumption and the condition of the food.
2. The question is objective and one of fact and degree. The appropriate inquiry is whether an ordinary person would regard what was being done as catering. The parties’ states of mind and intentions do not materially assist.
3. All relevant circumstances must be considered in the round. A catering supply will generally form part of a broader activity in which food is accompanied by an additional element of service or facilities. Relevant factors may include an occasion or event, preparation, presentation, crockery and cutlery, ancillary items, delivery and service at the place of consumption. No factor is exhaustive or necessarily decisive. The court endorsed the approach of Keene J in Customs and Excise Commissioners v Safeway Stores plc [1997] STC 163 and rejected excessive emphasis on the event-based approach associated with Customs and Excise Commissioners v Cope [1981] STC 532.
4. The terms of an overall catering contract are relevant but do not automatically determine the VAT treatment of individual retail sales to consumers. In this case they had little impact because the customers received nothing more or different from an ordinary retail purchase of a sandwich for consumption elsewhere.
5. The sandwiches were not supplied in the course of catering. They were ordinary retail sales, comparable with sales from a supermarket, sandwich shop or newsagent. The Tribunal was also entitled to regard the individual outlets as separate premises within the larger Television Centre. Since the sandwiches were not consumed in those units, Note (3)(a) did not apply. Tribunals should follow the statutory language and apply it with common sense to the circumstances of each case.
6. Dissent. Mantell LJ considered that supplying cold food in performance of express contractual catering obligations was itself a supply in the course of catering. He regarded the word “includes” in Note (3) as enlarging rather than restricting the statutory expression and would have allowed Customs’ appeal.

• Court of Appeal (Civil Division): [2006] EWCA Civ 730. By majority, dismissed HM Revenue & Customs’ appeal.
• Manchester VAT and Duties Tribunal: on 6 May 2005, allowed Compass’s appeal against Customs’ determination and certified a direct appeal on a point of law.