The Court of Appeal upheld a decision of the VAT tribunal ([2005] BVC 2,590) that supplies of cold prepared food, such as sandwiches and salads, from retail food outlets operated by the taxpayer at the BBC Television Centre qualified as zero-rated because they were not supplies ‘in the course of catering’.

Facts

The taxpayer company was the representative member of a VAT group involved in the provision of catering. In 2001, it agreed to provide food to employees and visitors from various facilities within the BBC Television Centre in London. The premises comprised 21 buildings and rights of access were given to 22,000 BBC employees and 38,000 non-BBC staff, although on any one day there would be some 8,000 people within the complex.

It was common ground that food provided by the taxpayer in the various restaurants and cafeterias on the site was supplied in the course of catering and was standard-rated. However there were six retail units from which the taxpayer supplied hot food, drinks and confectionery, which it conceded were standard-rated, and cold food such as sandwiches and salads, which it argued were zero-rated. None of the six units had any seating, tables or counters at which customers might eat the food purchased.

Customs decided that all supplies of food by the taxpayer on the BBC premises were standard-rated since the cold food was supplied ‘in the course of catering’ and so excepted from zero-rating, and was for consumption on the premises on which it was supplied within VATA 1994, Sch. 8, Grp. 1, Note (3)(a).

The VAT tribunal allowed the taxpayer's appeal against that decision. It concluded that the disputed supplies by the taxpayer were not in the course of catering and were not supplied for consumption on the premises, since the relevant premises were the outlets and not the whole Television Centre ([2005] BVC 2,590; Decision No. 19,053). The tribunal gave permission to appeal direct to the Court of Appeal. The Revenue argued that all the food supplied at the Television Centre by the taxpayer was supplied in the course of catering because of the overall contractual arrangement for the taxpayer to supply catering services to the BBC at the centre, and that the food was supplied for consumption on the premises namely the Television Centre.

Issues

Whether the cold prepared food was supplied ‘in the course of catering’ in VATA 1994, Sch. 8, Group 1; and whether the food was supplied for consumption on the premises on which it was supplied within Note 3(a).

Decision

The Court of Appeal dismissed the appeal by a majority. Mummery LJ (with whom Scott Baker LJ agreed) approved the approach of Keene J in the case of C & E Commrs v Safeway Stores plc [1997] BTC 5,003, where the judge concluded that the test was an objective one: whether the ordinary person would regard what was being done as being ‘in the course of catering’. The state of mind or intentions of the parties did not assist. Whether a particular supply was ‘in the course of catering’ was a matter of fact and degree. It was not necessary for the supply to be incidental to an event, activity or function.

Although the terms of the overall catering contract between the BBC and the taxpayer were among the circumstances relevant to the question whether the sandwiches supplied by the taxpayer were supplied ‘in the course of catering’, that particular circumstance had little impact in this case.

There was no satisfactory reason why the liability of individuals to pay VAT should turn on whether the particular supply was from an outlet which was subject to an overall contract for the supply of catering services to another party. When supplies of sandwiches were made at the taxpayer's food outlets, the individuals to whom the supplies were made obtained nothing more than and nothing different from what could be supplied in another part of the television centre, such as the newsagents located in the Centre, or close by in the High Street supermarket or sandwich shop.

Viewed objectively the supplies of sandwiches made to individual customers were not ‘in the course of catering’. The individual customers were simply buying and being supplied with sandwiches in the same way as if they were buying them and being supplied with them zero-rated from another available retail outlet. It made little sense that they should be made liable to pay VAT in the one case, but not in the other. It followed that there was no error of law in the conclusion of the tribunal on that issue. If, contrary to that conclusion, the sandwiches were supplied by the taxpayer to retail customers ‘in the course of catering’, it was fairly and reasonably open to the tribunal to conclude on the evidence before it that the case did not fall within Note (3)(a), as the sandwiches in question were supplied at retail units which constituted premises separate from the remainder of the premises comprising the television centre. The sandwiches were not therefore supplied for consumption on the premises on which they were supplied.

Accordingly, the appeal would be dismissed on the ground that there was no error of law in the decision of the tribunal.

Sir Charles Mantell (dissenting) said that he differed from the other members of the court as to the weight to be given to the contractual arrangements between the taxpayer and the BBC under which the sandwiches were eventually supplied to the customers and preferred the contrary argument that supplies by the taxpayer had to be seen in context as the fulfilment of their contractual obligations to the BBC. The word ‘includes’ in note (3) should be given its ordinary meaning, with the result that the note had no bearing on the present circumstances and the appeal ought to be allowed (C & E Commrs v Cope (1981) 1 BVC 430 considered).

Court of Appeal (Civil Division). Judgment delivered 9 June 2006.