VAT news and cases roundup: April 2018

Afro-Caribbean takeaway food was provided hot to the customer

Pegasus (Manchester) Limited v Commissioners for Revenue and Customs [2018] UKFTT 126 (TC) was an appeal against a VAT assessment for £117,254 for food sales that had been treated as zero-rated.

HMRC argued that the food was served hot and was therefore standard-rated. The appellant was a takeaway food outlet in the Arndale market in Manchester, providing African and Caribbean cuisine such as rice, wraps and curries. The appellant supplied food which it described as ‘healthy foods, freshly prepared’ and was open seven days a week from 11am to 6pm. The food was prepared on-site, in a kitchen in the market on a floor below the retail unit from which the food was sold.

Once the food had been prepared it was cooled to approximately 19-20C and placed into gastronorms, which are containers designed to fit into the bain marie used in the retail unit. Temperature checks of the food were taken in the kitchen. Sample temperature charts were shown, indicating that the food had reached 19-20C at approximately 10am each day.

The appellant submitted that the supplies of takeaway food should be zero-rated on the grounds that the cooked food was not hot and that cold food served separately from the cooked food fell within the zero-rating provisions.

The appellant argued that the cooked food was not hot at the time that it was provided to the customer because:

  1. the food was cooled in the kitchen before serving;
  2. African-Caribbean food should not be served hot as it loses its unique flavour and it is intended to be served at the ambient temperature;
  3. the bain marie’s temperature bore no reflection to the temperature of the food.

The appellant claimed that HMRC’s assessment was based solely on the fact that the food had been placed in a bain marie at 56C. This did not translate to the temperature at which food was sold to a customer, which was confirmed by the fact that, in a visit to the premises, HMRC had agreed that the food was not hot and that no steam was observed from the food.

HMRC submitted that as the cooked food was kept in a bain marie with a constant temperature of 56C, the food was hot as it would be at a temperature above the ambient temperature. The food had been kept hot as it was stored in an environment which provided applied or retained heat.

HMRC further submitted that the dominant purpose of using the bain marie was to sell food which was hot, as the food was edible after the original cooking; compliance with the the Food Safety and Hygiene (England) Regulations 2013 was only required where the food was to be sold hot. ‘Hot’ did not need to mean piping hot, so that the absence of steam in the retail unit did not mean that the food was not above the ambient temperature – the definition of ‘hot’ in VAT legislation for these purposes.

The provision of forks and napkins to customers indicated that the food was intended by the appellant to be consumed as sold.

The First-tier Tribunal (FTT) considered that:

  1. the food would have been raised to the ambient temperature from 19-20C by being kept at the ambient temperature for at least one hour after cooling to 19-20C, as that temperature was reached at approximately 10am, and the food was then held for at least one further hour before being placed into a bain marie;
  2. it was a matter of basic physics that heat would be exchanged between the water in the bain marie, which was maintained at a constant 56C, and the food in a gastronorm that entered the bain marie at the ambient temperature such that the food would be heated as a result of being placed in the bain marie.

The FTT found that the food was hot as defined in the relevant legislation when it was supplied to the customer, and the appeal was dismissed.

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Written by Ellie MacKenzie

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