QSR LIMITED T/A FIRST Tasteappellant

19528

VALUE ADDED TAX— zero rating – supplies of sandwiches and cold food to offices and within units in multi-occupancy buildings – VATA Schedule 8 Group item 1 – whether supplies made “in the course of catering” or “ food for human consumption” – meaning of “catering” and exceptions – supplies not made in the course of catering as to sandwiches and cold food – yes as to business lunches - whether the food to be consumed “on the premises” – Note (3) to item 1 –food not consumed on premises – appeal allowed

MANCHESTER TRIBUNAL CENTRE

QSR LIMITED T/A FIRST TASTEAppellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMS Respondents

Tribunal:DAVID S PORTER (Chairman)

ARTHUR E BROWN (Member)

Sitting in public in Manchester on 3 February 2006

Noel J Tyler a VAT Consultant from VATangles for the Appellant

Jonathan Cannan of counsel instructed by the acting solicitor for the Commissioners for H M Revenue and The Commissioners for the Respondents

© CROWN COPYRIGHT 2006

1

DECISION

1. This is an appeal by QSR Limited trading as First Taste (“the Appellant”) against an assessment raised by The Commissioners on 27 October 2004 in the amended sum of £51,678.81 for the period 06/02 – 04/04. The Commissioners claim that the Appellant were supplying food to customers in the Manchester area in the course of catering. The food in question was sandwiches, cut and garnished and presented in plastic containers (“the platters”) and delivered to the customer’s offices. Further, the provision of sandwiches and cold food from two units in Manchester and Chester were supplies “on the premises on which they were supplied”, within the meaning of note 3 to item 1 of Group 1 of Schedule 8.Valued Added Tax Act 1994. The Appellant accepts that some of their supplies should be standard rated, but that the sale and distribution of their sandwiches and cold food should not be standard rated.
2. Noel Tyler appeared for the Appellant and called Barney James Taylor a Director to give evidence. Jonathan Cannan appeared for the Commissioners and produced two bundles of documents.
3. We have been referred to 15 cases the most recent and, in our view, the most comprehensive is 19053 Compass Contract Services UK Limited. (“Compass”). We consider the case to be particularly useful because the tribunal chairman, Colin Bishopp, analysed his understanding of the various cases and succinctly identified the law. We make no apology in referring to his observations. We have adopted his propositions of “catering per se” and “on the premises” in identifying the two strands of argument necessary to decide this case.
4. The appeal concerns two propositions. In relation to the supply of the sandwiches and cold food in the platters The Commissioners argue that these are supplies “in the course of catering” and therefore should be standard rated. (The catering per se argument). In relation to the supply of sandwiches and cold food from the two units The Commissioners argue that these are supplies “on the premises” in note 3 referred to below. (The “on the premises” argument).
5. Group 1 of Schedule 8 reads:-

“ The supply of anything comprised in the general items set out below, except-

(a)a supply in the course of catering

(b)a supply of anything comprised in any of the excepted items set out below,….

General items

Item No

1.Food of a kind used for human consumption

Excepted items

1. Confectionary

Notes

(1) ‘Food’ includes drink…

(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

1. We shall first deal with the facts for the two propositions. The principal facts for both propositions have been agreed between the parties and we set them out only adding to them for clarity, matters which were confirmed at the hearing.
2. The Appellant was registered for VAT from 15 December 1999 and commenced trading in April 2002. The Appellant carried on a business as a producer and retailer of food from premises at and known as :-

(1)Units 9 and 10, Slough Industrial Estate, Ordsall Lane, Salford, M5 4SZ. (“The Salford Premises”) It is here that the sandwiches and the food, ordered from the Appellant’s menu (to which we refer later) are prepared, placed in the platters and delivered to the customers in the various offices.

(2)Oxford Street, Manchester. No issue exists between the parties with regard to the sandwiches supplied from the Oxford Street premises.

(3)3000 Manchester Business Park, Aviator Way, Manchester M22 5TG (“The Airport Unit”). The Business Park belongs to the Regus Group PLC. That unit, in the multi-occupancy Building, concerns this appeal as to the sale “on the premises” of sandwiches and cold food to employees and others in the building. That food is supplied for consumption out of the unit.

(4)Regus House, Herons Way, Chester Business Park, CH4 9QR (“The Chester Unit”) This is the other unit in a multi-occupancy Building also the subject of the sale “on the premises” of sandwiches and cold food to employees and others in the building. That food is also supplied for consumption out of the unit.

1. We are concerned with the supply of cold food and sandwiches to both the customers in Manchester and within the Airport and Chester Units. We have to decide whether or not the supply of sandwiches and cold food is supplied in “the course of catering” the “catering per se” argument and therefore standard rated. If we decide the supply is of food for human consumption and not “in the course of catering” we then need to decide if the supply is a “supply for consumption on the premises” namely is the entire building housing the Airport and Chester units considered to be the premises since the supply of the sandwiches and cold food would then amount to catering and be standard rated.. (The “on the premises” proposition)
2. With regard to the catering per se proposition, the facts are as follows: The Appellant’s trading consists of the supply and delivery of sandwiches, business lunches and corporate entertaining. Their customers select from a variety of menus and the food is made up at the Salford Premises. The menu is very comprehensive. The menu indicates at the front that all the food is cooked in their kitchens. If there is an office function and the customers are entertaining more than 50 people, the Appellant will plan the menu with the customer and provide drinks, service at the table and all the equipment. They will also tidy up afterwards. Both parties have agreed that this amounts to catering and is standard rated and has been so charged by the Appellant.
3. In relation to the sandwiches and cold food we were shown one of the sandwich menus. For example Sandwich Platter 3 (numbered s3 costing £2.85 per person) consists of a selection of sandwiches: Smoked Scottish Salmon with crème Fraiche; Smoked Ham & Swiss Cheese; Chargrilled Vegetable & Mozzarella; Wensleydale Cheese with Cranberry and Rocket and a Chicken Caesar. The sandwiches were cut into 20 quarters garnished with parsley and arranged in the platter. All the sandwiches are made with malted wholegrain bread.

11. The Business Lunches were somewhat more elaborate consisting of pies pastries chicken and sandwiches. (Lunch L2 costing £5.95 per person), for example, consists of : Pastry Selection Sausage Rolls; Cheese Roulades; Pork Pies; Dim Sum; Cheese Puffs and Chargrilled Honey and Citrus Chicken. Sandwich Selection Thai Ginger Chicken; Beef with Horseradish; Atlantic Prawn Cocktail; Mature English Cheddar with Branson Pickle and Atlantic Tuna and Red Onion with fresh Coriander. All the sandwiches are made with malted wholegrain bread.

12. The Business Lunch Menu produced to us for the Airport Unit appears to be identical to that used in the Manchester area for the deliveries save that it is headed up “included within daily delegate rate” and is contained in the brochure for the Unit produced by Regus to advertise the building and which refers to the following:-

Business Catering

Choose from the following menus:

Breakfast

A selection ofPasteries, Croissants with Butter and Jam, Fresh fruit, Fresh Orange Juice , Tea and Coffee

Working Lunch

Selection of Filled Sandwiches Goujons of Chicken with a Lemon Mayonnaise Dip, Vegetarian Pizza, Crisps, Fruit and Cakes

13. The platter used for all the menus was produced to us. It is approximately 18 inches long and 12 inches wide with a clear top with First Taste embossed upon it. The platter is chilled to 5 degrees centigrade and delivered in a refrigerated van to the customers’ offices. The business lunches, which are more substantial, are delivered in the same way and at the same temperature. It is also possible to order a cheese board, drinks and fruit. No cutlery is supplied, although napkins can be provided. Mr Taylor confirmed that the Appellant has been charging VAT at the standard rate on the business lunches and when hot food is supplied (for example Hot sausage sandwiches). The Appellant also arranges catering for corporate entertaining. Again we were told that when providing that service the Appellant provides all the requisites expected from a catering service: Delivery of Cutlery, glasses, service at the table and other ancillary articles. The Appellant charges VAT at the standard rate in those circumstances

14The Appellant supplies the various offices with a menu and an order form. The order form sets out the various options using the numbering “s1” through to “l8” some 20 alternatives plus Extra Choices consisting of 8 different selections. The entire order form consists of one side of an A4 sheet. The form is then signed and the company’s name and address added. The time of delivery is also included. The form is then faxed to the Salford Premises. An additional charge of 30 pence per person per platter is made to reflect the cost of delivery and refrigeration. Mr Taylor told us that the Appellant prefers the orders to be placed the previous day, but realistically many orders were placed in the morning for delivery at lunch time. Mr Cannan made much of the fact that as the plastic containers contained 20 quartered sandwiches and were delivered to the offices, and therefore must have been for more than one person. He suggested that several of the staff would order the sandwiches and then sit down together to eat them. Mr Taylor stated, and we believe him, that the Appellant did no more than deliver the plastic containers to the office reception areas and it would not know whether the sandwiches were eaten in groups, at a corporate meeting, or individually.

15Mr Cannan also referred to an invoice no 3282 (page 117 in the bundle) addressed to Masons Solicitors, 100 Barborolli Square, Manchester, totalling £91.81 There is written on the invoice under Special Instructions. “Pensions Seminar”. It is unclear whether that has been written by an employee of Masons, or by the Appellants. We would suspect Masons had written the words on the invoice. Further there is a signature of “V Young,” who appears to be the person to whom the invoice is addressed. Again Mr Taylor stated that the Appellant would not have known that the delivery was for a seminar.

16We were shown a comprehensive detail of many of the invoices in a VAT report (pages 126 to 158 in the bundle of Exhibits). Choosing a page at random (see page 138), we note that for the period 06/01/04 to 29/01/04 Gerber Technologies had placed assorted orders ranging from £6.90 to £60.50 and totalling for the period £268.75. These entries are not untypical of others in the report and it is impossible to tell from them the number of people partaking of the sandwiches on any particular day. Taking an average price of say £2.70 for sandwiches, this represents approximately 100 people. The dates cover 12 days so on average 8 people ordered each day. This would seem hardly enough to justify a function in the absence of a wider variety of items other than sandwiches and the element of service provided.

17With regard to the “on the premises” proposition the facts are as follows: In February 2004 the Appellant took over the agreements to operate the retail concessions within the multi-occupancy office buildings operated by Regus PLC in Manchester and Chester Business Parks. There was produced to the tribunal a draft agreement prepared by David Wallis Foysters Solicitors Liverpool. The parties agreed that, although it was not a copy of the completed document, it contained all the relevant clauses. The agreement is called “DELIVERED CORPORATE CATERING AND RETAIL AND CONCESSION AGREEMENT”.

18The definition section identified the meanings of various phrases:-

“ Retail Concessions”… the retail food concessions in the two office facilities at Manchester Business Park and Chester Business Park and shown edged red on the plans contained in the fourth schedule to this agreement” (The Appellant was appointed the sole and exclusive occupier of the Retail Concessions under the terms of the agreement)

(Unfortunately no plans were produced to the tribunal, but we are satisfied that they would have shown a dedicated single unit in each building for the supply of food)

“Delivered Corporate Catering”… Packaging in the standard style of the Appellant from time to time: First Taste Menu items for Corporate Catering - to be refreshed by the Appellant from time to time at their discretion: Delivery times 7.30 am to noon. (We were advised by Mr Taylor that no cutlery was provided)

“ Office Facilities”…the eight offices listed in the second schedule hereto (These included the two units the subject of this appeal)

“Products” …the products of the type and specification manufactured and packed under the Appellant’s Trade Marks as may be amended by the Appellant from time to time in respect of the Delivered Corporate Catering.

“ Services”…Coffee service –all day: Breakfast Service 8.am – 11am: Lunch Service 11am – 2.30 pm: Café and Snack Service 2.30pm – 3.30pm

The Appellant was appointed as the sole and exclusive supplier of the Products to the Office facilities. Mr Taylor advised us that there were one or two drinks machines in the building which did not belong to the Appellant. The agreement was for a period of two years and was then terminable by either party giving not less than six months notice. The agreement has not been terminated. The sandwiches and cold food were ordered in the morning and delivered in the platters.

19The Airport Unit consists of a unit on the ground floor of the building for the supply of hot and cold food and drink, as well as for the sale of newspapers, periodicals etc. Mr Tyler produced a photograph of the Airport Unit. We find that the unit is typical of food franchises in the airport. Mr Taylor told us that the Appellant had taken over the unit from a previous operator and apart from the cash machine all the other items belonged to Regus PLC. The layout of the ground floor of the airport building consists of a single office block with a reception area at the front. When entering the building there is a sign to the Airport Unit. The entrance is at the end of a 40 foot corridor with a door into the Airport Unit. The corridor continues across the Airport Unit and there is another door at the other side to the offices. The serving counter is set up on a curve with a transparent food display cabinet and the usual coffee and chocolate machines. On the opposite side are some chairs, stools and tables for customers who wished to eat in the unit. There is a door directly onto the Car Park through which customers from other parts of the airport complex gain access. Mr Cannan suggested that the corridor was a thoroughfare used by the people in the building to move around at ground floor level. We think that that is unlikely as the room was used principally as a dedicated unit for the supply of food. The doors to the unit are not locked in case the thoroughfare is needed in an emergency.

20Mr Cannan referred us to the Regus PLC brochure for the building in which the Airport Unit is situated. It referred to:

• Board Rooms: Executive catering on request
• Training rooms: full catering service available
• Meeting rooms: Refreshment and catering included in delegate packages.

Manchester Business Park offers :-

• 24 Hours secure access
• 24 Hour closed circuit television
• On site dedicated sandwich/coffee bar

21On the basis of the above Mr Cannan considered that the Building was dedicated to Regus PLC’s clients, designed to encourage businesses to use the whole building for their business needs. Any sandwiches and cold food supplied from the Airport Unit were predominately for the consumption of those clients and they were therefore eaten “on the premises”. Mr Taylor gave evidence to the effect that people from outside the Airport Unit, and the building in which it was situated, also used the Airport Unit. He said that the Appellant is anxious to encourage people from outside the building to buy sandwiches from the Airport Unit as the Appellant hoped that those other customers might in the long term use the Appellant for the supply of food to their offices on a similar basis to the food supplied to offices in Manchester. Further, Regus PLC wanted the Airport Unit to be a focal point as it improved their chances of letting other buildings on the site. On balance, we believe that the Airport Unit was also used by customers from outside the building. The facts as we find them are that the Appellant Airport Unit is a self-contained unit supplying food for consumption both in the Airport Unit at the chairs and tables provide for that purpose and for employees in the building and third parties from outside the building to purchase with a view to eating the food some where else in the building or elsewhere.