VAT Treatment of Canteens

Following the decision of the European Court of Justice in Hotel Scandic Gasaback AB v Ritsskattererket (Case C-412/03), Revenue has reviewed the VAT treatment of staff canteens. The revised VAT treatment of canteens is set out hereunder.

Where the turnover from a staff canteen or the cost to the employer of providing canteen services exceeds the VAT registration threshold in force (currently €25,500), VAT must be accounted for on the supply of canteen services as follows:

(a). Canteens that are operated by the employer on a profit-making basis.

The employer continues to be accountable for VAT on the actual canteen receipts.

(b). Canteens that are operated by the employer where no charge is made on the staff.

The employer continues to be accountable for VAT on the cost of supplying the service. (Cost includes the food, equipment, canteen staff wages and canteen overheads).

(c). Canteens that are operated by the employer where a charge is made on the staff that is less than the cost of providing the service.

The employer is accountable for VAT on the actual canteen receipts. The employer is no longer accountable for VAT on any additional costs incurred in providing the canteen service.

(d). Canteens that are operated by a commercial caterer as principal where the caterer receives payment from the staff and from the employer who also provides some facilities.

The caterer continues to be accountable for VAT on the receipts from the staff and the employer. In addition, the employer is accountable for VAT on any additional costs incurred in providing the canteen service, including the payment made to the caterer.

(e). Canteens that are operated by a commercial caterer as agent of the employer where the employer receives payment from the staff and makes a payment to the caterer as well as providing premises, equipment, etc.

The employer continues to be accountable for VAT on the actual canteen receipts. However, the employer is no longer accountable for VAT on any additional costs incurred in providing the canteen service.

Entitlement to input credit

Where an employer is liable to account for VAT in respect of the provision of staff canteen services, the employer is entitled to claim input credit in respect of VAT suffered on the provision of such services.

Claims for repayment for prior years

Some taxpayers may be entitled to repayment of VAT paid in prior years on the basis of Revenue's former treatment of staff canteens. It should be noted that any claim to repayments of VAT arising out of the revised VAT treatment of staff canteens is restricted to claims received for periods within the statutory time limits set out in section 20(4) of the Value-Added Tax Act 1972 (currently 4 years).

Interest may be payable by Revenue on repayment claims in accordance with section 21A of the Value-Added Tax Act 1972 (as amended).

All claims must be submitted to the taxpayer's local Revenue District, and should be supported by an explanation of the circumstances in which the claim has arisen, evidence that the tax was paid together and comprehensive computations of the make up of each claim.

Adjustments to repayment claims to take account of income tax/corporation tax liabilities

Taxpayers may have claimed a deduction for income tax or corporation tax purposes in respect of VAT suffered on the provision of canteen services that is now the subject of a VAT repayment claim. Accordingly, adjustments may be required to the income tax/corporation tax liability for the relevant years/accounting periods arising from any repayment of VAT made to the taxpayer. Rather than re-opening prior years of assessment/accounting periods to give effect to these adjustments, for ease of administration the VAT repayment plus interest to be made for the years/periods in question are to be reduced by the amount of the additional income tax/corporation tax that falls due.