The European Court of Justice (ECJ) ruling applies to venues that serve freshly-made food and drinks sold for immediate consumption off premises.
Smith & Williamson, an accountancy and financial services group, said businesses trading in take-aways could claim thousands of pounds from HM Revenue & Customs (HMRC) and urged them to lodge claims as soon as possible in order to maximise back-dated refunds, which go back four years.
“Thousands of large and small businesses could benefit from this judgment,” said the firm’s VAT director Hannah Dobson.
“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.
“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.”
To qualify, the predominant element of the transaction should be about food, rather than service. The definition covers food and meals prepared for immediate consumption by boiling, grilling, roasting, baking “or other means”.
The ECJ said that the presence of counters – but not tables with chairs – are not enough to change the definition from goods to catering services.
Doubts for UK
The decision follows a request by German courts for the ECJ to rule on whether hot food and hot drinks sold for “immediate consumption” should be defined as supply of goods, which are usually subject to zero VAT, or catering services, which pay the full VAT level.
However, HMRC has cast doubt on whether it applies in the UK.
An HMRC spokeswoman said: “HMRC does not believe the recent ECJ decision relating to the supplies of certain foodstuffs in Germany has application in the UK. Both supplies of food and supplies made in the course of catering in the UK are treated as supplies of goods.”
Dobson said that HMRC had previously argued that the sale of food and drink items should be subject to VAT if they are freshly prepared and eaten ‘on the premises’.
“This ECJ decision has now questioned HMRC’s treatment. 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.”