Value Catering Ltd & Ors Revenue & Customs [2011] UKFTT 329 (TC) (18 May 2011)
DECISION
1. The
Appellant made voluntary disclosures on 27 March 2009 and 29 May 2009 for
repayment of VAT which it claimed it had overpaid on supplies of cold food. We
were informed that HMRC accepted that (following the Court of Appeal’s decision
in Compass Contract Services UK Ltd [2006] EWCA Civ 730, [2006] STC 1999) the part of the claim which related to cold takeaway supplies from kiosks
should have been zero rated and repaid the VAT to the Appellants. The rest of
the claim was disputed.
2. This
hearing was only to decide the preliminary issue whether certain supplies made
by the Appellants were in principle zero rated. Other issues such as quantum,
time limits, compound interest and unjust enrichment were not at this time in
front of this Tribunal.
3. Although
the claim was made under three different names it seems there is but a single
appellant. The company originally went by the name Craven Gilpen & Sons
Ltd but in 1982 changed its name to Craven Gilpen & Sons (1982) Ltd. At
the same time for reasons not explained to us it also changed its VAT
registration number. At some point later there was a management buy-out: the
Company’s name was changed yet again, this time to CGC Events Limited. The MBO
company, Value Catering Ltd, bought CGC Events Limited and became the VAT representative
member of the group. HMRC has treated the claimants as being Value Catering Ltd
and the earlier two Craven Gilpen companies but this does not appear to be
correct. Although there have been three VAT registrations and three changes of
name, as we understand it there has been but one legal entity which is the
company now known as CGC Events Limited. So it seems to us that the claimant
for supplies actually made by CGC Events Limited but deemed to be made by Value
Catering is Value Catering; for the earlier supplies made by CGC Events but
under its earlier names, CGC Events is properly the claimant although it
appears that it may have assigned its rights to Value Catering.
4. In
any event this Tribunal was concerned only with the preliminary issue of
whether the supplies were properly zero or standard rated. We refer throughout
to “the Appellant” and make no distinction whether this was before or after the
VAT group was formed.
5. The
Appellant lodged two appeals, the first in February 2010 and the second in July
2010. Both were against the same decision dated 21 January 2010 although the
July appeal also appealed HMRC’s earlier decisions of 27 October 2009 and 26
November 2009. The appeals were consolidated: the second one was out of time
but HMRC took no objection to this: the subject matter of the appeal was the
same and it appears that the Appellant had not received the November letter
until shortly before the July appeal. We directed that the second appeal be
admitted out of time.
6. The
voluntary disclosure goes back to 1973 which was before the introduction of the
1984 VAT Act (“VATA”). The parties were agreed that the law applicable before
the VATA in so far as relevant was the same as the law in VATA and that it was
appropriate for the Tribunal to consider the validity of the entire claim as if
the provisions of VATA applied to the whole of it. And this is what we have
done. (In fact the definition of hot food in Note 3(ii) changed with effect
from 1 January 2005 but this has no relevance to the law considered in this
appeal).
The law
7. Section
30 of VATA provides for certain supplies to be zero-rated:
“(1) Where a taxable person supplies goods or
services and the supply is zero-rated, then, whether or not VAT would be
chargeable on the supply apart from this section –
(a) no VAT shall be charged on
the supply; but
(b) it
shall in all other respects be treated as a taxable supply;
And accordingly the rate at which VAT is treated as
charged on the supply shall be nil.
(2)
A supply of goods or services is zero-rated by virtue of this
sub-section if the goods or services are of a description for the time being
specified in Schedule 8 or the supply is of a description for the time being so
specified.”
8. The
effect of zero-rating is that the supply should be free of VAT because not only
is no VAT charged on the sale by the taxable person (the person making the
supply) but VAT charged to the taxable person on supplies attributable
to the zero rated supplies is recoverable by them.
9. Schedule
8 Group 1 to VATA sets out the zero rating applicable to the supply of food.
It provides so far as relevant to this appeal:
“Group 1 –
FOOD
The supply of
anything comprised in the general items set out below except –
(a) a
supply in the course of catering; and
(b) a supply of anything comprised
in any of the excepted items set out below, unless it is comprised in any of
the items overriding the exceptions set out below which relates to that
excepted item.
General items
Item no
1. Food of a kind used for human
consumption.
2. Animal feeding stuffs.
3. Seeds or other means of
propagation of plants comprised in item 1 or 2.
4. Live animals of a kind
generally used as, or yielding or producing, food for human consumption.
Excepted items
[not reproduced as not relevant]
Items overriding the exceptions
[not reproduced as not relevant]
NOTES:
(1) ….
(2) ….
(3) A supply of anything in the course of
catering includes –
(a) any supply of it for
consumption on the premises on which it is supplied; and
(b) any supply of hot food for
consumption off those premises;
And for the purposes of paragraph (b) above ‘hot food’ means food which,
or any part of which –
(i) has been heated for the purposes of enabling it to be consumed
at a temperature above the ambient air temperature; and
(ii) is above that temperature at the time it is provided to the
customer.
(4)
…
(5)
…
(6)
….
(7)
Any supply described in this Group shall include a supply of services
described in paragraph 1(1) of Schedule 4.
Meaning of “in the course of catering”
10. There are a
number of High Court and Court of Appeal decisions on the meaning of “in the
course of catering” which in so far as they decided an issue of law are binding
on this Tribunal, save in so far as a subsequent decision of the Court of
Justice of the European Union (“CJEU”) might have called them into question.
Neither party did in fact suggest that the recent CJEU decision in the combined
cases of Manfred Bog C-497/09, CinemaxX Entertainment GmbH & Co KG,
Lothar Lohmeyer C-501/09, and Fleischerei Nier GmbH & Co KG C-502/09 had
any impact on the English authorities. The dispute between the parties was in
how to apply the authorities to the facts in this case.
The Bog case
11. Nevertheless we
considered whether it was correct that Bog was not relevant. The Bog cases
were about whether the supplies in issue were subject to the standard rate or
reduced rate of VAT. The Sixth VAT Directive (in force at the time) permitted
Member States to apply reduced rates to certain supplies, including the supply
of foodstuffs (Article 12(3)(a) and Annex H). Germany availed itself of this permission
and its VAT law allowed a reduced rate on the supply of foodstuffs. The
wording of the reduced rate in German law did not entirely mirror that used by
the Sixth VAT Directive in Annex H. More significantly, German law also
contained a deeming provision, deeming supplies of food for consumption on the
spot to be supplies of services.
12. The Bog case
concerned sales of sausages and chips from a mobile snack bar where the snack
bar had a folding roof and a counter where customers could stand to consume
their snack. The evidence was that most customers consumed their snack on the
spot.
13. The CinemaxX case
concerned sales of popcorn and tortilla chips by the cinema owner to patrons.
The snacks were mostly consumed in the auditoria.
14. The Lohmeyer
case concerned the sale of sausages, chips, steaks, etc from a snack stall with
counters.
15. The Fleischerei
case concerned what the CJEU described as a ‘party catering service’. The food
was ordered and then supplied hot in closed containers. Customers had the option
to choose in addition cutlery, crockery, tables and/or waiting staff.
16. German law
deemed the supplies at issue in the combined cases to be supplies of services.
The question was whether as a matter of EU law they were supplies of goods. To
answer this the CJEU said (in accordance with its own well established case
law) that the first question to be answered was whether the taxpayers made a
single supply or multiple supplies? It referred to its leading authorities on
this, Levob Verzekeringen and OV Bank C-41/04, Aktiebolaget NN C-111/05
and to CPP C-349/96. In the four cases referred the local courts had
already made findings of fact that the supplies by each of the Appellants was a
single supply and the CJEU saw no reason to think that they had made these
findings on anything other than the correct understanding of the law.
17. The CJEU said
(paragraph 57), also consistent with its earlier decisions such as CPP,
that “in the case of supplies in connection with a party catering business such
as that at issue in the main proceedings in [the Fleischerei case], it
may be noted inter alia that the existence of a single transaction is
independent of whether the caterer issues a single invoice covering all the
elements or issues a separate invoice for the supply of the food…”
18. On the basis the
supplies had already been determined to be a single supply, the CJEU then
considered whether the supplies should be characterised as a supply of goods or
a supply of services. The principles it gave on which this should be determined
were:
·
All the circumstances of the case should be taken into account
(citing Faaborg-Gelting Linien)[1996] STC 774(para 61)
·
Its predominant elements should be identified from all the
circumstances; (para 61) and citing Faaborg
·
The test of predominancy is objective as it must be determined
from the point of view of the typical customer (para 62);
·
They should be assessed from a qualitative and not just
quantitative importance(para 62);
·
Only services other than those which necessarily accompany
the sale of goods should be taken into account (as an example, the CJEU said
the Court should disregard the displaying of products on shelves or the issuing
of an invoice) (para 63)
19. Citing Faaborg-Gelting,
the Court went on to say at paragraph 64 that the CJEU had already determined
that restaurant transactions are a supply of services as the transaction is a
bundle of elements of which provision of food is only one component and
services largely predominate, but that the same would not be true of take-away
food as the supply of food is not coupled with services designed to enhance
consumption on the spot in an appropriate setting.
20. At paragraph 68
the Court gave more specific interpretation of their rules: cooking food is a
service but not always a predominant service to make it an overall supply of
services. The CJEU drew a distinction between cooking to order and cooking in
anticipation of demand. The latter, said the Court, “cannot in itself
characterise that transaction as a supply of services”.
21. In the Bog
and Loymeher cases the CJEU concluded that the “rudimentary” facilities
supplied – counters to eat at in the open but no seats - was “negligible human
intervention” and could not alter the predominant character of the principal
supply as a supply of goods (see paragraph 70).
22. It came to the
same conclusion in respect of sales in cinema foyers in CinnemaxX. The
food was prepared and kept hot in anticipation of demand and not in response to
a particular customer; the food preparation and packaging was summary and
standard; rudimentary facilities only were provided in some foyers and in
practice the food was mostly eaten in auditorium seats which were not exclusively
for consumption of food. The CJEU considered that this supply of popcorn also
was a supply of goods as the additional services were insufficient to convert
to a supply of services.
23. The Court came
to a different conclusion in the Fleischerei case. At paragraph 75 it
records that there were lots of options for the customers. Even the bare
service of delivery involved food preparation that was less standardised than from
the mobile snack bar. The Court considered food quality, creativity and
presentation would be important to the customer and that it was relevant that the
customer could choose to have a dish made up and was not restricted to the set menu.
The Court also considered it relevant that the food was delivered warm, at a
set time and with the option of cutlery and service. At paragraph 80 the Court
concluded that “in the light of those considerations it must be considered
that except in cases in which the caterer does no more than deliver standard
meals without any additional service elements, or in which other special
circumstances show that the supply of the food represents the predominant
element of the transaction, the activities of a party catering service are
supplies of services”.
24. The court went
on to consider the meaning of “foodstuffs” in Annex H. This is hardly relevant
to the UK which does not apply Annex H. The Court said that as it is an
exception from the general rule it should be narrowly interpreted and decided
it must be interpreted as covering food and meals which have been prepared for
immediate consumption by boiling, grilling roasting, baking or other means.
The Bog Case and UK zero rating of food
25. In brief, in Bog
& others the CJEU decided that, depending on the facts, where there was
a single supply of food combined with other services it might be a single
supply of foodstuffs or it might be a supply of the service of catering. What
impact does this have on UK food zero rating in general and the appeal in this
case?
26. Does it mean
that unless it is a single supply of the service of catering that a supply
of food under VATA is a zero rated supply of food? We do not think so and nor
did counsel for either party suggest to us that it did. Both counsel accepted
that a supply of foodstuffs (as per Bog) might nevertheless be in the
course of catering.
27. We think this is
right. It is consistent with Sch8 Group1. Although there is nothing on the
face of Group 1 to restrict the application of this Group to goods,
nevertheless it is clear that it only envisages a supply of goods as:
·
It is only the supply of items in the general items which can be zero
rated and all those 4 items (see the list in paragraph 9 above) are goods;
·
Note (7) specifically includes those supplies which are
technically supplies of services simply because they are partial interests in
supplies of goods – implying that otherwise such supplies, because they are
services, would not be in Group 1.
28. Our conclusion
is that Group 1 only applies to goods. So that a supply of catering, which is
a supply of services, would not have been within Group 1 even if Group 1 did
not contain the exclusion “in the course of catering”. If “in the course of
catering” meant a supply of catering the exemption would be pointless as
supplies of services are not within the Group.
29. And if the
drafters of the Group had merely meant to clarify that the group applied to
supplies of goods and not to supplies of catering then it could have said
“except supplies of catering”. On the contrary, it used the words “in the
course of catering” and we consider they intended to mean something different.
30. We also note
that the CJEU in Bog decided that a supply of food could be coupled with
catering-type services and nevertheless still be a supply of goods: such as a
supply of hot food from a mobile snack bar with a counter on which to eat it. UK law is consistent with this in that it anticipates (because it excludes it from zero
rating) that a supply of food can nevertheless be a supply of goods in the
course of catering but not a supply of catering.
31. In other words,
the supply of food without more is a supply of goods. Where the supply is not
simply of food but of a bundle of both goods and services, it can be a supply
of goods or a supply of services depending on which element is predominant.
Where the services predominate, it is a supply of catering. Where the supply
of food predominates (as with mobile snack bar in Bog), it is a supply
of goods albeit with ancillary services. And so far as the UK is concerned such a supply may be a supply of food in the course of catering.
32. We note that Sir
Douglas Frank QC sitting as a judge of the High Court in the case of Cope
[1981] STC 532 said a popular meaning of “catering” was “..the provision of
food incidental to some other activity…” This might suggest he thought that
catering has to be a supply of services and “in the course of catering”
inevitably means that if the principal supply is food then it is not in the
course of catering. However, that is taking the comment out of context. He
was discussing that catering is catering when it was food supplied at a special
event: he was not thinking of the distinction between goods and services.
33. The point has
not been considered in other UK authorities all of which pre-date Bog. Compass
is the leading case on the meaning of ‘in the course of catering’. It
concerned the supply to the appellant’s customers of cold food, principally
sandwiches, prepared at and sold from retail outlets operated by Compass and
situated under licence within the BBC complex at Shepherd’s Bush. There is no
suggestion in the judgment of the Court of Appeal that the supply was other
than the supply of food and in particular the supply of a sandwich: the
question the court considered was whether that supply was in the course of
catering. However, the decision does not mention the distinction between
supplies of goods and services and refers to supplies of food in a restaurant
as being impliedly supplies of food in the course of catering rather than a
supply of catering (see paragraph 4 and paragraph 19) whereas under Bog
and Faaborg it seems a meal in a restaurant is a supply of services
(the service of catering).
34. But the point was
not necessary to the court’s decision in Compass: no one was
contending that the sale of the sandwiches had to be a supply of services in
order to be a supply in the course of catering and we think, had the point been
made, the court would not have agreed. It is clear that the court considered a
supply of food in the course of catering was a supply of food with ancillary
services. For instance, at paragraph 39(4) where Mummery LJ listed a number of
points relevant to determining whether a supply is in the course of catering he
said to take into account:
“…the circumstances surrounding the supplies of food
are relevant to when the supplies are ‘in the course of catering’ which
expression indicates that the supplies in question must generally be part of,
or associated with, a broader activity in which the supply of food is
accompanied by an additional element, usually of service or other facilities
designed to add something to the experience of buying and consuming the food
supplied.”
35. We find, for the
reasons given above, a supply in the course of catering is not a supply of
catering and goods may be supplied in the course of catering. “In the course
of catering” is a UK law concept, it was not considered in Bog, and in
investigating its meaning we are (largely) limited to UK cases.
Meaning of ‘in the course of catering’
36. As mentioned,
the Court of Appeal decision in Compass is the leading authority on the
meaning of ‘in the course of catering’. The Court considered (paragraph 17)
that ‘in the course of catering’ should be given its ordinary meaning (save of
course to the extent its meaning is extended by Note (3)). The test, as stated
by Keene J in Safeway (and approved by the Court of Appeal in Compass
at paragraph 42) is objective: “would the ordinary person regard what was being
done as being ‘in the course or catering’?”
37. At paragraph 39(4)
Mummery LJ listed a number of points relevant to determining whether a supply
is in the course of catering:
“(4) the circumstances surrounding the supplies of
food are relevant to whet the supplies are ‘in the course of catering’ which
expression indicates that the supplies in question must generally be part of,
or associated with, a broader activity in which the supply of food is
accompanied by an additional element, usually of service or other facilities
designed to add something to the experience of buying and consuming the food
supplied. The relevant circumstances include whether the supplies of food are
associated with an organised activity, even or occasion such as a wedding
reception, a charity fundraising event, or a sporting occasion, in the course
of which supplies of food are made. They also include the provision of
facilities to supplement the experience of consuming the food supplied (eg
eating the food on the premises at which it is supplied is the instance of ‘in
the course of catering’ covered by the Note)
38. Keene J also
listed factors (approved in Compass) which would be relevant to
determine whether a supply was in the course of catering, although making it
clear the list was not exhaustive, no factor was determinative, and all factors
had to be considered. In summary his points were (page 169):
“….There will be a range of factors to be taken into
account…Those factors would seem to me to include such matters as whether the
food I indeed supplied in connection with an occasion or other event; the
degree of preparation which remains to be carried out by the recipient is
likely to be a relevant consideration, as it the presentation of the food
itself – in other words, is the food in a form where one would ordinarily put
it on the table with no further steps being taken? One would want to bear in
mind whether crockery and cutlery are provided along with the food itself and
any other of the usual ancillary items which go with a meal. Whether it is
delivered, or not, by the supplier may often be a highly material factor.
Whether it is served by the supplier to those eating it, at the place where
consumption occurs, will also be a relevant factor.”
39. Although we have
said Bog is of limited application to the UK zero rating of food as it
dealt with whether there was a supply of catering (services) or a supply of
food (goods) and not whether the supply of food was in the course of catering, Mr
Puzey put the view that it must follow that indicia of a supply of catering
must also be indicia of a supply in the course of catering. We bear in mind
that we are interpreting UK law and in particular the ordinary meaning of “in
the course of catering”.
40. At paragraphs
76-80 the Court of Justice considered why a party catering service was likely
to be a supply of services and not goods. The factors it took into account in
reaching this decision were that:
·
The food is made to order rather than standardised preparation in
anticipation of demand (in contrast to the mobile sausage and chip van);
·
The food quality and presentation will be of concern to the
customer;
·
The customer would have choice and might be able to have dishes
made to order;
·
The goods would be delivered and the delivery time would be to
suit the customer;
·
The customer would offered be optional extras such as crockery
and cutlery.
We think these indicia are all indicia which are relevant
to the ordinary meaning of “in the course of catering”. Indeed, inevitably, to
some extent they duplicate what was said in Safeway and Compass.
To the extent they are additional, we agree with Mr Puzey that we should take
these factors into account when considering whether a supply is in the course
of catering.
Place of consumption
41. Mr Barlow
pointed out that the Court of Appeal in Compass at paragraphs 52-56
stressed the importance of the supplier having control of premises. However,
this was in the context of whether it was cold food supplied on the premises
which is deemed by Note 3 to be in the course of catering. Its decision was
that for the purposes of Note 3 the reference to premises was a reference to
premises controlled by Compass. This was its retail units and not the BBC
complex as a whole. It was accepted by HMRC in this case that Note 3 did not
apply and that in relation to the various supplies at issue in this appeal and
listed below consumption was off premises controlled by the Appellant.
Note 3- presumption of non-catering if cold food eaten elsewhere?
42. Mr Barlow said Note
3, which specifies two situations which are ‘in the course of catering’,
creates a presumption that any supply of food not within Note 3(a)(consumption
on the premises) or (b)(hot food) is not in the course of catering. We note
that Mummery J at paragraph 21 did say that Note 3 indicated that a supply of
cold food off the premises was not in the course of catering. This is entirely
logical as Note 3 was on the face of it intended to draw a distinction between
supplies on and off the supplier’s premises and between hot and cold food.
43. However that is
not the same as saying that there is a presumption that all supplies of cold
food off the supplier’s premises are not in the course of catering. At best it
strongly suggests that supplies of cold food for consumption off the premises without
more are not in the course of catering. The question is whether cold food for
consumption off the premises with additional services is in the course
of catering and it does not seem to us that Note 3 creates a presumption either
way. As indicated by Keene J in Safeway and the Court of Appeal in Compass,
we must look at all factors and decide whether the supply is in the ordinary
meaning of ‘in the course of catering’.
Delivery
44. Mr Barlow’s view
(which must be right) is that the bare fact food is delivered to the customer
does not convert a supply of food into being a supply of food in the course of
catering. He said, and we agree, that there is the world of difference between
a waiter bringing in a silver tray and boy on bike leaving sandwiches at a doorway.
However, we find delivery is a factor which must be considered as it is more
likely to be in the course of catering if the food is delivered than if it is
not. But delivery (and the manner of it) is not decisive. The Court of Appeal
in Compass said delivery is relevant but not necessarily decisive; by
implication the CJEU have also said this in paragraph 80 of Bog as they
indicate delivery of food without more is not enough to convert the supply to
one of catering .
Payment terms
45. We find (not
surprisingly) that when dealing with members of the public the Appellant
required payment in advance (eg for Harrogate Flower Show food platters) but
when dealing with businesses (such as the stand delivery service) it allowed
payment after the event (although it might ask for a deposit) and just reserved
the right to levy cancellation charges (which it did not always exercise).
46. Mr Puzey
suggested deferred payment terms were a service which made the overall supply
more likely to be in the course of catering. We do not agree. We think
deferred payment terms, even if it is correct to see them as a service provided
to the customer ancillary to the main supply (on which we express no view), do
not differentiate between a mere supply of food or a supply of food in the
course of catering. It is not whether there is an ancillary service that will
make the supply of food into a supply in the course of catering, but whether
the ancillary services are related to catering. Deferred payment terms have
nothing to do with the consumption of food but everything to do with the
suppliers’ judgment of how difficult it would be to enforce payment after the
event. That is nothing to do with catering. We do not consider whether or not
deferred payment terms were offered to be relevant to whether the supply was in
the course of catering.
Value of supplies
47. It was evident
from the sample invoices provided that some of the supplies made by the
Appellant would be for large sums eg a supply to one customer for stand
deliveries (see below) at one event was £3,500. We agree with Mr Barlow that
the value per se of the supply cannot be relevant to the question of catering.
As with payment terms, the value of the supply is not related to whether
the supply of food is in the course of catering. No doubt every day thousands
of pounds of raw food is bought and sold by businesses (not being a supply in
the course of catering) whereas the supply of a single meal in a café may be
for only a few pounds (a supply of catering). We ignore the value of
the supply in determining whether it is in the course of catering.
Other supplies
48. Mr Barlow additionally
made the point, which must be right, that the Appellant’s other, undoubted
taxable supplies of catering, could not colour the nature of the supplies at
issue in this appeal. Indeed, we note that in this case the Appellant,
irrespective of our decision, is in the difficult position of making some
supplies which both sides accept are standard rated (waiter-service catering
providing hot food at shows and their self-service café at the Yorkshire events
centre) and some supplies which both sides accept are zero rated (sandwiches
sold to the public from kiosks). The question is the status of the supplies at
issue in this appeal and that cannot be coloured by other supplies, not
connected with these supplies, being made by the Appellant.
Description as caterer
49. The Appellant
does describe itself as a caterer but we agree with Mr Barlow that this is
irrelevant as the Appellant can describe itself as it wishes but this does
alter the legal nature of what it does and in any event it is clear that some
of its supplies (not at issue in this appeal) are undoubtedly those of a
caterer.
Party platters and the Safeway case
50. The Tribunal in Safeway
Stores plc (1996) VTD 14067 decided that party platters made by
Safeway to order and collected by the customer were not a supply of food in the
course of catering. It was merely a zero rated supply of food. The decision
was upheld by Keene J in the High Court HMRC v Safeway Stores plc [1997]
STC 163 and Keene J’s decision was approved in the Compass case by the
Court of Appeal.
51. Mr Barlow sees
the facts in this appeal as very similar to those in Safeway with the
only real distinction being the question of delivery. As can be seen from
below we are unable to agree with him on this but we also note that only the
High Court decision is binding on us. The High Court decided that Tribunal’s
decision was one which it was open to the Tribunal to reach: this is far from
saying that in another case on similar or even identical facts the Tribunal
must reach the same conclusion. As Keene J said, in that case there were
factors pointing towards the supply being in the course of catering (clearly the
food intended for an event and was laid out on well-presented trays which could
be served as they were), and factors pointing away from this (no delivery; no
waiting service; no cutlery etc; that Safeway would not know about the event
for which the food was supplied nor have a personal relationship with the
customer; some of the trays were not whole meals; some trays required further
preparation). We have to consider the appeal in front of us on its own
particular facts.
Relevance of an event
52. There is binding
authority (Safeway and Compass, see the extracts cited in
paragraphs 37 & 38 above) that whether the food is supplied in connection
with an event is a relevant (but not conclusive) factor to consider when
looking at whether a supply is in the course of catering. Mr Barlow suggested
that this factor is somewhat negated when the supply of food is to persons
attending the event to man a stall rather than be entertained. He pointed to
the Appellant’s supplies at the Farnborough Airshow (discussed below) where security
guards might be there under their contract of employment and bound to man an
exhibit 24 hours a day. They were not there to be entertained but to work. He
referred to Compass at paragraph 39(4) quoted above in paragraph 37.
53. We do not find
the that the Court of Appeal made such a distinction in their paragraph 39(4)
nor do we find the distinction relevant. The Court referred to an event with
which the provision of food is associated as being relevant: they did not
refer to the reason for a person’s presence at the event. It might be said, on
the contrary to Mr Barlow’s view, that someone who cannot leave the event is in
more need of catering than someone there by choice and able to leave and find
food elsewhere. In conclusion we find the provision of the food in connection
with an event to be relevant to the question we are asked to consider, but not
whether a person consuming the food is there as a worker, exhibitor, or visitor
as long as they are there in connection with the event.
Optional extras
54. As will be seen
from below, the Appellant provided some items as optional extras such as
crockery and cutlery (disposable for sale and durable for hire) and other
equipment (eg tables and urns) for hire. HMRC’s case was that this indicated
that the supply of the food was in the course of catering.
55. The Appellant
originally said at the hearing it relied on HMRC’s alleged agreement in the
Statement of Case (see the following paragraph) that the fact the cutlery and
crockery and equipment was optional and had to be paid for separately meant
that that it was a separate supply. Its case was that, therefore, the supply
of the cutlery, crockery and other equipment, being a separate supply, was not
relevant to the question of whether the Appellant made the supply of the food
in the course of catering. It considered the optional equipment hire/sale
should be ignored by the Tribunal.
56. The Appellant
points to HMRC’s Statement of Case which says at paragraph 2.6 that “the
parties agreed that the supply of cutlery, napkins and other non-food extras
was a separate supply, which was standard rated.” This statement, we find,
arose from an conversation which the HMRC officer (Mrs Withers) had with Mrs
Duke (the Appellant’s representative) in which they agreed that the Appellant’s
equipment supplies would be standard rated irrespective of the status of the
food supplies.
57. This sentence is
in a part of the Statement of Case which is a recital of the history to the
dispute and later paragraphs of the Statement of Case refer to Mrs Withers’
decision letters. Mrs Withers said in her initial letter of 26-10-09 that one
of the factors she had taken into account in reaching her conclusion that the
suppliers were in the course of catering was that the Appellant supplied
optional equipment hire and disposable cutlery and crockery which was charged
for separately. A similar comment was made in her letter of 21 January 2010.
58. We find HMRC’s
position on the status of the optional equipment hire and purchase as set out
in the Statement of Case to be ambiguous. Not only did the apparent concession
appear in a section which was a recital of the history of the dispute, it was
also clear from Mrs Withers’ decision letters to which the Statement of Case
referred in the same recital that HMRC did consider the optional supplies to be
relevant. Later in the hearing Mr Barlow said that, although the Appellant has
thought the status of such supplies as separate was agreed, nevertheless it had
not caused them to put their case differently and Mr Barlow said he did not
claim that HMRC were bound to be held to paragraph 2.6 of the Statement of
Case.
59. For these
reasons we do not find that HMRC could be held to having made a concession on
the facts as set out in paragraph 2.6 of their Statement of Case and we
consider it is open to us to consider whether the supplies of the optional
extras were part of the overall supply of food.
60. We note that on
the question of how many customers took up the option of cutlery, however, Mr
Barlow suggested that, had the Appellant known the separate status of the
supplies of the cutlery was not conceded, it might have put forward
different invoices. He did not say that they would have put forward different
invoices. It was open for Mr Coulson to tell the Tribunal if the percentage of
customers choosing cutlery was minimal: however, in evidence Mr Coulson stated
he was unable to say how many customers took equipment as well as food. Therefore
we do not find that the invoices misrepresent the position. In conclusion, we
find on the basis of the invoices submitted in evidence by the Appellant that a
significant proportion of the customers took the option of cutlery and/or
crockery and/or napkins.
61. To what extent
are the optional extras relevant? It is of course highly relevant to the
parties whether the optional equipment is part of the supply of food if we were
to hold the supply of the food was not in the course of catering. It would therefore
be zero rated and it would follow that the optional equipment hire would also
be zero rated as part of an overall supply of food not supplied in the course
of catering.
62. Are the optional
extras relevant to whether that supply of food is in the course of catering? We
consider that they are. The CJEU in Bog suggested that it is relevant
in that the Tribunal should take into account the availability of eating
implements when considering whether a supply is of catering (paragraph 79) and
that such supplies would be part of an overall single supply (paragraph 76).
63. We agree with Mr
Puzey that whether the hire of cutlery was on a separate invoice (or separately
itemised on a single invoices) is not relevant: see Bog at paragraph
52-57. However the Appellant chooses to invoice its supplies cannot affect the
nature of them.
64. We also agree
with Mr Barlow that it does not necessarily follow that just because the
national court had found there to be a single supply in Fleischerei that
the supply of the cutlery was part of a single supply of the food where it was
an optional extra in this case. Nevertheless, on the facts of the appeal in
front of this Tribunal we find that the supply of food together with the supply
of cutlery/crockery/napkins with which to eat it, even where chosen as an added
extra by the customer, is clearly within the CJEU’s case law as a single supply
under CPP as the cutlery is not an end in itself but the means of better
enjoying the principal supply of food.
65. We also think
that the availability of the additional service is what is relevant rather than
whether the service was taken up in a particular case. The CJEU states that the
optional availability of dishes made to order is relevant (paragraph 77) and we
think, even if this is not expressly said in relation to cutlery in paragraph
79 this is clearly implied as the cutlery was in that case an optional extra
(see paragraph 38). In other words, the optional availability of cutlery can
colour the nature of the supply even if the customer does not take up the
option.
66. We note in
passing that the Appellant also considered we should ignore delivery for the
same reason as it thought we should ignore the equipment hire: that where
charged for separately we should ignore it. However, there was no suggested
concession by HMRC on delivery and in any event on the facts we find that delivery
was not optional whether or not it was charged for. We do consider delivery
relevant for the reasons given in paragraph 44 and we do not consider it
relevant whether there was a separate charge for it shown on the invoice.
Conclusion on law
67. We consider that
these factors must also be relevant to the question of whether a supply was in
the course of catering and we combine the factors taken into account in Compass,
Safeway and Bog and conclude that the following factors should all
be borne in mind (but the list is not definitive nor is any one factor on it
decisive):
·
whether the food was supplied in connection with an occasion or
other event and whether the supplier knew this;
·
whether the food was made to order or merely prepared in
anticipation of demand;
·
whether the customer could suggest a menu;
·
the degree of preparation which remained to be carried out by the
customer before the food could be eaten;
·
whether the food well-presented and in a form where a person
would ordinarily put in on the table with no further steps being taken;
·
whether crockery and cutlery were provided along with the food
itself or were available as an optional extra;
·
whether and how and at what time the food was delivered by the
supplier;
·
whether a waiting service was provided by the supplier at the
place of consumption;
·
whether the food was a complete meal.
We apply these principles to the facts in this case.
Facts
68. Evidence was
given by Mr Darren Coulson, who started work for Craven Gilpen & Sons Ltd
over 20 years ago and has risen through the company to his present position as operations
director. He is also a shareholder. We accept his evidence in the round but
note his memory was not (as he admitted) 100% reliable. For instance, he was
confused on whether there was charge for delivery on the stand delivery service
and which company was the VAT registered entity.
69. It was his evidence
which we accept as it was borne out by the various menus dating back to 1986 that
the supplies offered by the Appellant had in essentials remained fairly
unchanged over the 30-odd years at issue in this appeal. The sandwich fillings
had changed with fashion – plain cheese & tomato or egg & cress
sandwiches offered in the 1980s were now more likely to be “honey roast ham and
salad” or “egg and prawn in a lemon mayonnaise” but essentially the choice of sandwich
buffets and lunch boxes and so on remained as we describe below.
70. There were three
types of supply in dispute: they were the stand delivery service (of which the
Farnborough Airshow was a sub-set); the food delivery service and the
lunchboxes sold at the Harrogate Flower Show.
Stand Delivery Service
71. The Appellant
would by agreement with the event organisers supply food at a show or event (such
as an agricultural show) to customers with a stand or other pitch or exhibit at
the event. Its 2001 menu described the service as:
“Food deliveries, we will deliver to you direct a
buffet of your own choice fully prepared and attractively displayed ready to
serve yourself.”
We accept the description as accurate. The customer had
to order the food days in advance: where the show was for 3 days all 3 days
would be ordered on the same form. Final numbers had to be confirmed 72 hours
in advance. The customer would place an order choosing from the menus on
offer. There was no minimum order although the invoices we were shown related
to very large orders. Members of the public could not use this service.
72. We find that the
customers would vary between those making a small order to provide for say 2
members of staff on duty all day at the stand to customers such as high street
banks placing very large orders for up to 100 persons as they were providing
food for visitors to their stand as well as their own staff.
73. Menu 1 was a
“light finger buffet” and comprised only savoury items: sandwiches, pork pie,
quiche, nuts, crisps, and chutney.
74. Menu 2 was
described as a “finger buffet” and comprised sweet and savoury items:
sandwiches, chicken pieces, vol-au-vents, brochettes, crisps, nuts, chutney,
and strawberry tartlets.
75. Menu 3 was
described as a “fork buffet” and again comprised sweet and savour items: ham,
salmon, various salads, bread rolls, and a lemon roulade. Eating it required
cutlery and customers would have option of buying or hiring cutlery from the
Appellant (at an additional charge) or providing their own. We find that most
would choose to obtain it from the Appellant.
76. Menu 4 was
described as a cocktail/canapé menu. It comprised nuts, crisps, chutney,
croutons, smoked salmon on bread, savoury tartlets, and savoury brochettes.
77. Another option
which could be ordered was a “lunchbox” (called “luncheon box” in 1986). We
find this was a complete meal for one person of fish/meat with salad and bread
roll with a dessert. Disposable cutlery, serviette and condiments were
provided. The intended market was staff on a stand who could not get away at
lunchtime.
78. Customers could
also order sandwiches and sundries such as crisps, nuts, flap jacks and
pastries, and drinks. Alcoholic and soft drinks were also supplied in bottles
and cans of various sizes; coffee and tea was only provided dry: the customer
would have to add water.
79. The Appellant
also sold and hired out equipment. A separate charge was made. Cutlery,
tables, tea urns etc were all available for hire. Some customers would order
food alone, others food with equipment, others just equipment.
80. The Appellant
would have temporary kitchens at the event. Some items would be prepared by the
Appellant off site, other items would be prepared and delivered to the kitchen by
third parties (such as pies from a pie company). On site the Appellant’s staff
would put the food together together, cut it up, and place it on trays or platters.
81. Historically the
food would have been placed on disposable foil trays and covered in cling film;
now it is placed on black plastic disposable platters with clear plastic domes
or lids. The food would be supplied cold and although it could be heated there
was no expectation this would happen. When delivered the food was normally
placed into fridges at the back of the customers’ stands; historically it would
have been put on tables at the back. The food was not laid out on tables ready
to eat: it was delivered by delivery men and not waiters.
82. Mr Barlow
considered the delivery of food in this case to be perfunctory. We cannot
agree: it was implicit in the evidence we heard that it was important that the
trays were delivered flat and the right way up. It was delivered by delivery
men but it was not left in the doorway in a bag.
83. In the past delivery
was included in the charge but more recently the Appellant had started to charge
separately for delivery. The approximate delivery time had to be stated by the
customer in advance. Delivery was not always possible (due to location of
stands) and in some 10% of cases the food would be collected by the customer.
84. The Tribunal was
shown pictures of the trays and luncheon boxes. We find the food was neatly,
even attractively, laid out with some garnishing with lettuce, tomato and
cucumber. The Appellant objected to HMRC’s description of its food as “cold
buffets” but we note that it is the description the Appellant itself uses in
its literature and is one we find apt.
Stand delivery service – Farnborough International Airshow
85. We were provided
with sample order forms from the 2006 and 2004 airshows. We find this service was
similar to the normal stand delivery service except that in addition the
Appellant offered a variety of breakfasts and “airline trays”. The airline
trays were complete meals (although they did not include a drink) of a main course
with salads and a sweet dessert with cheese and biscuits. Cutlery and other
items of equipment were an optional extra.
86. It was explained
to us that the reason for the difference was that the airshow lasted for some 3
weeks and certain stands employed staff who would be unable to leave the stand
for security or other reasons and would need to have breakfast, lunch and
dinner provided to them. As mentioned above, Mr Barlow made the point that
although in such a case the food was provided in connection with an event, it
was for sustenance for the people whose job it was to mind the stalls and not
in any way part of entertainment of them. As stated in paragraph 53, we do not
find this to be relevant.
87. In the exhibits
attached to the sample form from 2006 was a page of terms and conditions and it
was Mr Coulson’s evidence that this was not really relevant to the Farnborough
Airshow as it talked about a minimum of 75 guests per day and he thought it was
included by mistake. We accept his evidence that it was a mistake as we don’t
find that this service had a minimum of 75 persons per day.
Conclusions on stand delivery service (including Farnborough)
88. There are
pointers in both directions whether this is a supply of food in the course of
catering or merely a supply of food. We find the following indicators suggest
it is in the course of catering:
·
the food was supplied in connection with an occasion or other
event known to the Appellant (and indeed at which the Appellant was also
present for the purposes of its business);
·
the food was made to the customer’s order;
·
the customer could (and we find from invoices that some did) make
up its own menu using the extra sandwiches and sundries as well as ordering the
pre-set menus;
·
the food required no further preparation before consumption other
than removing the trays from fridges and placing them on tables and removing
the covers;
·
the food was well-presented and we find in a form where one would
ordinarily put it on the table to be eaten with no further steps being taken;
·
cutlery was provided with the lunchboxes; otherwise where
necessary it was available as an optional extra and in a substantial number of
cases the option was exercised;
·
the food would be delivered at the approximate time specified by
the customer in about 90% of cases. Where it was not delivered but collected
this was due to logistical difficulties;
·
most menus were intended to be a complete meal or provide a snack
between meals. Drinks were not included but were optional extras.
89. We find the
following indicators suggest it is not in the course of catering:
·
no waiting service was provided; the customers had to place the
food trays on the tables, help themselves to the food off the trays, and clear
up afterwards;
·
the food was not consumed on the Appellant’s premises.
90. In the round we find
that this was a supply of food in the course of catering. This was not a mere
supply of food; rather the customers’ need for ready-prepared, ready to serve,
ready-to-eat, well presented food delivered to their stands was catered for by
the Appellant.
Food delivery service
91. We were provided
with a sample order form from 2002. The Appellant described their service as:
“Our food delivery service will ease the problems of
entertaining at home or in the office. We are just a telephone call away and
will deliver to you direct a buffet of your own choice fully prepared and
attractively displayed ready to serve yourself….You simply select items to add
to the suggested menus or you can select your own ideal buffet menu. All menus
are interchangeable to suit your needs. If you have some ideas of your own
then we are happy to provide a quote…..we also have available to hire any
equipment or tableware you may require.”
We accept this description of the Appellant’s service as
accurate.
92. Menu 1 was savoury.
It comprised sandwiches, pies, & crisps. Menu 2 was also savoury. It
comprised sandwiches, meat, finger food, and crisps. Menu 3 comprised sandwiches,
pies, chicken, finger food, and strawberry tartlets. Menu 4 would require
cutlery to eat it. It comprised meats, quiches, salads, bread rolls, and pudding.
93. There was a
large self-select section for customers to make up their own meals. It offered
a range of sandwiches, meats, salads, finger foods, and deserts from which a
buffet could be selected, or items interchanged with those off one of the set
menus.
94. There was a
delivery charge of £30 unless food for over 20 persons was ordered. Mr Coulson
believed that in the past the Appellant may not have charged for delivery on
any sized order but whether or not charged for separately we find the service
always did involve delivery. We find the customers were businesses having
internal or external meetings or private persons who were likely to be entertaining.
95. We find all
orders had to be made in advance. The Appellant’s terms were that they would want
confirmation of numbers to the nearest five within one week and confirmation of
the final number 48 hours before event.
Conclusions on food delivery service
96. There are
pointers in both directions whether this was a supply of food in the course of
catering or merely a supply of food. We find the following indicators suggest
it was in the course of catering:
·
Although the event was not always known to the Appellant, it was
the Appellant’s expectation that the food delivery service was used for an
event whether a private party-type event or a meeting in an office
·
the food was made to the customer’s order;
·
the customer could make up its own menu using the extra
sandwiches and sundries as well as ordering the pre-set menus and indeed the
Appellant offered advice with choosing a menu;
·
the food would be delivered to the customer’s premises at an
agreed time;
·
the food required no further preparation before consumption other
than placing it on tables and removing the covers;
·
the food was attractively displayed and in a form where one would
ordinarily put it on the table with no further steps being taken;
·
cutlery etc was available as an optional extra;
·
most menus were intended to be a complete course or a complete
meal.
97. We find the
following indicators suggest it is not in the course of catering:
·
the event for which the food was supplied was not necessarily known
to the Appellant;
·
no waiting service was provided; the customers had to place the
food trays on the tables, help themselves to the food off the trays, and clear
up afterwards;
·
the food was not consumed on the Appellant’s premises.
98. In the round we
consider that this was a supply of food in the course of catering. This was
not a mere supply of food; rather the customers’ need for ready-prepared, ready
to serve, ready-to-eat well presented food delivered to their home or office was
catered for by the Appellant.
Harrogate Flower Show
99. The Appellant
provided picnic platters to members of the public who ordered them in advance
at the Harrogate Flower Show. We were provided with a sample order form from
2010 and 2008. There was a choice of two menus, one with smoked salmon and ham
and various salads and the other with a vegetarian tart and various salads.
Either menu was a complete meal in that it included the main-course and a
dessert of fresh strawberries and cream and a bottle of water to drink. A
small bottle of wine was an optional extra.
100.The platters
were served on disposable trays with a plastic dome. The meat, fish and bread
roll were placed directly on the tray but the dressed salads and strawberries
were in small plastic bowls on the tray. Plastic disposable cutlery was
provided with the tray.
101.The meals
were prepared on site, stored in refrigerated vehicle and then collected by
customers from the “Gazebo” which was an awning on site at the Show. It was
expected that the customers would eat the picnic platter somewhere at the event
but not necessarily anywhere near the Gazebo: the Show organisers provided
various picnic areas.
Conclusions on Harrogate Flower Show
102.There are
pointers in both directions whether this is a supply of food in the course of
catering or merely a supply of food. We find the following indicators suggest
it is in the course of catering:
·
the food was supplied in connection with and at an event known to
the Appellant;
·
the food was made to the customer’s order;
·
the food required no further preparation before consumption other
than removing the covers;
·
the food was well-presented and we find in a form where one would
ordinarily eat it with no further steps being taken;
·
cutlery was provided;
·
it was intended to be a complete meal including drink.
103.We find the
following indicators suggest it is not in the course of catering:
·
The customer had very little choice – only two set menus were
available;
·
The food had to be collected by the customer and eaten elsewhere
although it was expected it would be eaten within the confines of the flower
show grounds;
·
no waiting service was provided and the customer would have to
dispose of the tray on which the meal was served;
·
the food was not consumed on the Appellant’s premises.
104.But in the
round we consider that this was a supply of food in the course of catering.
This was not a mere supply of food; it catered to the customer’s requirement
for a ready-to-eat picnic meal while attending the flower show. Although we
note in particular that choice was limited and the customers had to collect
their food, we think overall taking into account that it was a pre-ordered meal
ready to eat at the Flower Show with cutlery and drink that it was a supply in
the course of catering.
105.We are
conscious that of all the supplies made by the Appellant, this one is the most
similar to the supply in Safeway where the Tribunal reached the
conclusion that the supply was not in the course of catering, contrary to our
conclusion on the facts in this case. But our answer to that is that we
have to take all factors into account and the facts of the two cases are not
the same. In particular, in this case an entire ready-to-eat meal was provided
with cutlery. All the flower show attendee had to do was collect their picnic
tray, walk (within the confines of the flower show premises) to one of the
picnic spots, sit down, and tuck in. The hostess in Safeway would have
had to do rather more: collection (it was presumed) would be by car and the
food would need to be laid out on a table, and some of the trays needed extra
work. She may have provided her guests with plates, napkins or even cutlery. She
may have provided her guests with other food. It was presumed Safeway would
not have known the nature of the event for which the food was ordered: here
the provision of the food was inextricably linked with the flower show. In
summary, the facts although superficially similar were very different on close
inspection.
106.We also point
out that the High Court in Safeway ruled that the decision reached by
the Tribunal was one which on the facts it was open to it to reach. It did not
conclude that it was the only decision which the Tribunal could have reached on
the facts.
Conclusions
107.We note that
following Bog it is arguable that any or all of the above three supplies
by the Appellant were supplies of the service of catering like the party
catering service in Fleischerei. We were not asked to consider this and
it does not matter: a supply of catering is standard rated just as, in the UK at least, a supply of food in the course of catering is standard rated.
108.As noted
above under consideration of the three types of supply at issue in the appeal
we have concluded, for slightly different reasons in each case, that each was a
supply of food in the course of catering. It follows that the appeal is
dismissed.
109.This document
contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
TRIBUNAL JUDGE
RELEASE DATE: 18 May 2011
Cases cited but not referred to
in the Decision: R v Customs & Excise Commissioners, ex parte Sims (T/A
Supersonic Snacks) [1998] STC 210
