19528VALUE 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 TASTE Appellant

- and -

THE COMMISSIONERS FORHER 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

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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

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Excepted items

2. 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

6. 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.

7. 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.

8. 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

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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)

9. 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.

10. 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 of Pasteries, 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

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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

14 The 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.

15 Mr 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.

16 We 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

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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.

17 With 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”.

18 The 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.

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19 The 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.

20 Mr 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

21 On 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

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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.

22 The Chester Unit is smaller than the Airport Unit and is similarly approached from the reception area in the main building. The Chester Unit is some distance from the reception area, but is in a self-contained room with a single door entrance. The door is not locked. The Chester Unit operates on the same basis as the Airport Unit and services customers from within and outside the building

23 Before addressing the arguments for the parties we think it would be helpful to identify the particular issues before us. There are three supplies before us:-

a. The supply of sandwiches and cold food in the platters to the offices in Manchester

b. The supply of the Business lunches to the same customers in Manchester

c. The supply of sandwiches and cold food from the Airport and Chester Units to the employees in the Regus buildings and to third parties.

The issue is whether all three supplies are “the supplies of food for human consumption” and therefore zero rate or whether they are supplied “in the course of catering” so that they should pay VAT at the standard rate. With regard to the supplies from the Airport and Chester Units the Commissioners rely on the Note (3) as an extension of the meaning of “ in the course of catering” by the addition of the words “includes any supply of it for consumption on the premises on which it is supplied”. They argue that as the supplies are principally to the employees in the entire building the meaning of “premises” must be extended to include the whole building and the supply would therefore be a supply “for consumption on the premises”.

24. Sir Douglas Frank QC in the High Court decision of The Commissioners and Excise Commissioners V Cope [1981] STC 532 a case heard before paragraph (b) of note 3 was added (the supply of hot food for consumption off those premises) said of Note (3) in its original form at p 538:

“The first question to be decided is whether the word ‘includes’ in Note (3) is intended to be restrictive as counsel for the taxpayer contends, that is to say, should be construed as ‘includes and means’ or whether, as counsel for the Crown contends, the note operates to extend rather than circumscribe the scope of para (a) in sch 4. The word ‘includes’ is generally used in order to enlarge the meaning of words, but, as counsel for the taxpayer says, it is capable of the restrictive meaning if the context of the statute requires; see Stroud’s Judicial Dictionary. Counsel for the taxpayer submitted that there was no situation imaginable where ‘supply in the course of catering’ can mean for consumption off the premises on which it is supplied. However, as counsel for the Crown pointed out, that situation is quite common, as, for example, with wedding

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receptions, if the point of supply is taken to be the customer’s premises. Accordingly, I do not find it imperative to give the word ‘includes’ a restrictive meaning but, on the contrary, I think it has its ordinary meaning, that is it does not limit but, in accordance with the general rule, it has the extended meaning.”

We consider that the Judge’s view of the interpretation of the note is now generally accepted and a correct statement of the law.

25 Mr Cannan addressed us on the construction of an exemption and an exception to that exemption. He stated that an exception to the exemption ( ie “a supply in the course of catering”) falls within the normal interpretation regime, and therefore should not be strictly construed ( Elizabeth Blasi v Finazamt Munchen [1998] ECR 1 – 481 at paragraph 19).

26 At paragraph 52 in Compass Mr Bishopp states :

“The zero-rating of food is an exemption from the normal rule that supplies of goods by a trader acting as such are standard rated, and the differentiation of supplies made in the course of catering is an exception to that exemption. I should approach the matter in a manner, which does not unduly limit the scope of catering supplies, as that term is to be interpreted for the purposes of the domestic legislation, and thus extend the scope of zero-rating beyond its justifiable extent….Exemptions must be construed narrowly, but not so narrowly that distortion of competition is the result”.

We shall interpret the exemption “food of a kind for human consumptions” and the exception “a supply in the course of catering” accordingly.

27. At paragraph 58 Mr Bishopp continues:

“In Armstrong v The Commissioners and Excise Commissioners [1984] VATTR 53, the tribunal said that “ we think an ordinary person can recognise catering when he sees it”, and, more recently, in Whitbread Group Plc v The Commissioners and Excise Commissioners [2004] VAT Decisions 18706 at paragraph 32 it is said “like the proverbial elephant, catering is difficult to define but recognisable when one sees it”. For my part, I have not found that catering is so readily recognisable and, as many of the cases to which I was referred show, there are in fact marked differences of opinion about the meaning of the term. It is abundantly clear that it is not a word susceptible of easy definition”.

i. He continues:

“Resort to a dictionary provides little help. In the Oxford English Dictionary, “catering” is defined as “purveying of food and other requisites” and, a little more fully, a caterer is “one who caters or purveys provision for a household, club etc. In other dictionaries, “catering” is not separately defined, and one is left to derive its meaning from that given for “caterer”: “to provide food, services etc” or “caterer” “one who as a profession provides food for large social events etc” (Collins)”

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28. Mr Cannan suggested that the correct question is not whether any particular supply amounts to catering but, in the language of the Act, whether the supply is made “in the course of catering”. In considering that question the Commissioners accept:

Catering amounts to something more than merely making a supply comprising food items.

Catering involves the provision of a service or number of services associated with food

The nature and extent of the service involved in catering will vary according to the context and according to the type of food involved.

29 Mr Cannan further submitted that the authorities, referring to the meaning of the term “catering”, should not be read as creating a judicial definition or set of standard criteria to be applied. Each case must be judged on its own particular facts according to the ordinary meaning of the word. Those authorities, including previous tribunal decisions, may be illustrative of the sort of factors that are relevant

30 Mr Tyler submitted that the sole issue between the parties is whether the supply of the platters to workplace customers constitute a supply made “in the course of catering” or a supply of “food for human consumption”. He submitted that similar situations to that of the Appellant have been considered by the tribunal on many previous occasions. He then took us through several of the cases, to which we shall refer in our decision.

31 Dealing with the “catering per se” proposition first, we have decided that the supply of the platters is a supply of “food of a kind used for human consumption” and not “a supply in the course of catering”. In this modern age the presentation and supply of food has become very sophisticated and the dividing line between “food of a kind used for human consumption” and “ catering” is not easy to ascertain. Mr Bishopp’s analysis of the various cases in Compass does, we believe, highlight the way the tribunal have dealt with the matter and we propose to go through the relevant cases produced to us which identify that trend and which have lead us to this decision.

32 It is possible to discern a trend in relation to the characteristics that give rise to catering. The cases run from Bristol City Football Supporters Club VTD 164 in 1975, in which it was decided that the supply of tea, coffee, meat pies, sausage rolls and pastries from franchised stalls were supplies in the course of catering and therefore standard rated, because they supplied the spectators at the football match, to Compass in 2005 in which it was decided that the supply of mainly sandwiches and cold salads from six units in the BBC complex to be consumed out of the units from which they were purchased, were not supplied “ in the course of catering” but were “ food of a kind used for human consumption” and were not supplied “on the premises”.

33 As Keene J stated in Safeway Stores PLC STC 163 in 1997 the test is an objective one: would the ordinary person regard what was being done as being “in the course of catering”? In his judgement whether a particular supply is “in the course of catering” is a matter of fact and degree. There will be a range of factors to be taken

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into account by the body that is making the decision and no one factor by itself is likely to be decisive.

34 The line of cases up to Safeway Stores PLC relied heavily on the decision of Sir Douglas Frank QC in Cope STC 532 in 1980 where the prime consideration was that the provision of food was incidental to “a function”. In that case the seafood was supplied in disposable containers at a racecourse from stalls owned by the Taxpayer. The food was eaten elsewhere on the race course but Sir Douglas Franks decided that the “premises” were in fact the racecourse and that the supply had to be “in the course of catering”. This, in part, appeared to be because the Judge understood that the principal concessionaire had the use of the whole racecourse and his supplies were standard rated.

35 In the case of Out to Lunch (a firm) VTD 13031 in 1994 (a case heavily relied upon by Mr Tyler as being very similar to the present case) sandwich platters consisting of a circular basket about 1 ft in diameter containing four rounds of sandwiches, cut into triangular quarters that were arranged in six rows radiating out from the centre of the basket. Napkins were supplied in the basket. The sandwiches were garnished with cucumber and cress to make them appear more attractive and to keep them moist. The basket and contents were completely enclosed in cling film. Miss Peters (a representative of the appellants in the case) delivered the baskets and expected them to be returned after use. The tribunal chairman said:

“So far as the Appellants were concerned, in my judgment the provision of food by them was not incidental or ancillary to any function or activity….In my judgment however that fact (that the customers had businesses nearby) is insufficient to establish a connection between the provision of food and a function or activity which is necessary to turn a supply of food into” a supply in the course of catering”

36 Vodden VTD 1842 in 1984 and Wendy’s Kitchen VTD15531 in 1998 were both found to be supplies of catering. The food included sandwiches but in both cases the Appellant had set themselves up as caterers and had hoped that the incidental supply of sandwiches could be treated as food. They essentially supplied catering services for weddings funerals and other functions.

37 Closely analogous to the idea of “a function” is the suggestion that there is some “nexus” between the supply of the food and the customer. In Sims T/A Supersonic Snack STC 210 in 1987 Taylor J held that the supply, in circumstances not dissimilar from Mr Giuseppe Bergonzi (below), were not within the extended meaning of “in the course of catering” because they were supplied “on the premises”. In that case Mrs Sims was granted a licence by a company to operate a snack-bar in Unitair House, a building occupied by the company and several other commercial undertakings. The object of the licence was to provide a snack bar for the convenience of the company’s employees and to further the company’s interests. Mrs Sims conceded that 70% of the people using the snack-bar were from the building but she did not know how many came from the company. She sold mainly sandwiches from a

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unit 12 feet by 12 feet and the food was all consumed away from the unit but she did not know where. The judge said:-

“In my judgment, counsel’s persuasive arguments on behalf of the Crown are erroneous in this case. I do not see any similar linkage between the 70%, even, of the total clientele of this taxpayer, and the clientele in Cope. Here it is a pure matter of chance that other commercial organisations happen to have self-contained and separately owned or leased offices in the same block as Mercury. We do not know, nor did the tribunal know, what proportion of the 70% were Mercury employees and what proportion came from the other commercial organisations in the building but however that may be, simply to say that because the snack-bar is frequented by persons who work in adjacent offices gives sufficient linkage to cause what a snack-bar does to be catering seems to me to be casting the net far too wide”….as to the second limb and the consideration of note (3) (a) …’The premises here which this taxpayer had and where she supplied the food, and the only premises over which she had any control, consisted of one room 12 ft by 12 ft . In the ordinary meaning of the phrase ‘any supply of food for consumption on the premises on which it is supplied’ must, in my judgment in the circumstances of this case, refer only to that room’….’It seems to me to be impermissible to latch on to the mere geographical fact that other quite discrete and separate commercial premises happen to be in the same block and for that reason to lump them together as ‘the Premises’ within the meaning of the phrase in note (3)(a).

38 In Mr Giuseppe Bergonzi T/A Beppi’s Buffet Service VTD 12122 in 1994 the chairman came to the opposite conclusion because there was a “nexus” between the employees and the snack-bar. Mr Bergonzi had been asked by the Evans Group (a subsidiary of Burton Group PLC) to operate a snack bar from two rooms on the seventh floor of United Kingdom House in London, the whole of the floor being occupied by the Evans Group. He was to prepare cooked meals for the Directors and prepare snack bar facilities for the convenience of the other employees of the Evans Group working in the premises. He also supplied snacks to drivers and others who visited the building. Access to the seventh floor was by a security key card and strictly speaking anyone wanting to access the seventh floor had to obtain clearance from reception on the ground floor. It was clear from the evidence that Mr Bergonzi was expected to service the employees of the Evans Group and no one else. The supply was therefore “in the course of catering” because it was provided “on the premises”

39 In Emphasis Ltd VTD 13759 in 1995 the appellant installed computer terminals in offices. Orders were place through the machines for sandwiches using smart cards. The list of items available contained over 100 items comprising 40 different sandwiches, 8 flavours of crisps, 16 chilled drinks 10 chilled dairy desserts, sachets of soup and cheese jacket potatoes ready for microwaving. The orders were delivered in a refrigerated van to a central point in the office concerned. The tribunal decided that the supply was not a supply “in the course of catering” as it was no different from the employees telephoning a sandwich delivery service which is clearly not a supply “in the course of catering”. Again there was no ‘nexus’ between the supplier and the customer

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40 In Compass Mr Bishopp suggests “…If there is a link, or nexus, between the event and the food, the supply of the food will probably be made in the course of catering; but if the food is made available to those attending the event for no more intimate reason than that the human metabolism requires fuel at regular intervals, it will not be”

41 There is then a line of cases dealing with food which is ready for immediate consumption which is treated as such and not as a supply “in the course of catering”. The case of Safeway Stores PLC STC 163 (already referred to) is something of a watershed and highlights how the supply of fast food has moved in to the market place. Safeway sold ‘party trays’ comprising selected food items arranged on disposable foil trays, packaged in a display box or clear plastic dome. Customers usually ordered the party trays in advance using a special order form and collected them from supermarket delicatessen counter. Keene J said:-

“I have to say straightaway that I share the reservations expressed by the tribunal in the present case about the excessive emphasis being placed on the need for there to be a function or activity involving the gathering of people not assembled together simply for the purpose of having a meal. In my view it is perfectly possible for a supply to be “in the course of catering” when made to a family having a meal together, though, in such a case, one would tend to expect certain other of the indicia of catering to be present, such as delivery, service at the table or the provision of cutlery and other ancillary articles….. When I put all the factors together in this case, one can only conclude that there were some which pointed in one direction and some in the other”. He therefore found it impossible to say that the tribunal had acted unreasonably in finding that the supply was of food and not catering.

42 In Lawson T/A Country Fayre VTD 14903 in 1996 the husband and wife team held themselves out as caterers. Their customers worked in offices in Manchester. Orders were placed by telephone and made up by the proprietors on trays with cling film and put in a large rectangular plastic container 18 to 20 inches deep and 3 to 4 inches high, with an open front. About half of the customers requested crockery, cutlery and tablecloths. The trays were large and made of aluminium, they were not unattractive and people could eat off them. The baskets were delivered to the customers’ premises and sometimes to their kitchens. They were collected on the following day. The chairman said:-

“I note the reservations expressed by the tribunal and Keene J in the Saveways case about excessive emphasis being placed on the need for there to be a function or activity involving the gathering of people not assembled together simply for the purpose of having a meal if the supply of food is to qualify as a supply in the course of catering. If a sense of occasion is necessary, in my judgment in the instant case it lies in the nature of the food provided, which was perfectly capable of constituting and in most cases no doubt did constitute a complete meal…” This is a theme expanded by Mr Bishopp in Compass to which we refer shortly.

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43 In Taylor T/A Sandwich Heaven VTD 16211 in 1999 the appellants supplied a large selection of food in plastic platters garnished and covered in cling film. The platters were placed in baskets and on most occasions were delivered to the customers. The appellants removed the baskets on delivery but collected the platters the next day. The tribunal decided that the supply was “in the course of catering” for the following reasons:-

“The main factors that we have taken into account are that a separate menu was prepared for buffets and that that menu included a large variety of items other than sandwiches in particular cakes, cheeseboard and fruit which permitted a meal rather than a snack to be provided. We had regard to the fact that buffets were delivered and the platters were returnable. We also noted that the Appellants offered to supply, and did from time to time supply drinks, both hot and cold, and disposable plates, cups and serviettes but not crockery or cutlery. The food whilst attractively presented by the Appellants was not served by them. We took account of the fact that the Appellants did not provide buffets for a particular event but that they were aware of the type of occasion during which the food supplied by them was consumed…. The Appellants were supplying more than sandwiches in a convenient form for large numbers”

44 In Hodges T/A Priory Kitchen VTD 16185 in 1999 Mr and Mrs Hodge were bakers, confectioners, caterers and vendors of takeaway food and were registered for VAT in the ordinary course of their business. Sandwiches and cold pies which they sold to customers were zero-rated. Mr and Mrs Hodge also accommodated customers requiring something more substantial than ordinary supply of food. The food was attractively arranged on platters and garnished. If delivered, it was then set out on the tables. The plates and dishes had to be returned by the customers and staff could be made available if required. Mr Hodge, in delivering the platters, sometimes set up the tables. If the delivery was at about the same time as the food was to be eaten he would remove the cling film cover. He would return later to collect all the items so that they could be washed up at their shop. The tribunal not surprisingly found that the supply was “in the course of catering” as Mr and Mrs Hodge were effectively supplying a full meal.

These cases appear to decide that the supply is “in the course of catering” if a more comprehensive meal is being served.

45 In Compass the appellant occupied some 13 units within the BBC Television Centre in circumstances in which the tribunal considered they had sufficient control of their use for these to be independent units. The appellants supplied food and drink to employees and others in the centre. The only issue before the tribunal was whether the sale of sandwiches and similar items from 6 of those units was “in the course of catering” and although the documentation referred to “catering” the tribunal considered that the characteristics of the supply should apply. The tribunal decided that the supply was not “in the course of catering”:-

“The sales with which I am concerned are of sandwiches and similar items packaged in precisely the same way as they are presented in high street shops.

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Compass provides no element of service. Its supplying disposable cutlery is, as I have already remarked, trivial and I do not consider that it could possibly be argued that it amounts to a service since it is the customer, in my experience, who selects the cutlery; moreover disposable cutlery is commonly provided by high street shops without affecting the zero-rating of their supplies of sandwiches and salads There is nothing in my judgment to distinguish the supplies made by Compass from those made by high street sandwich bars”.

46 We were also referred to the case of Peter Barnett & Terence Larsen VTD 11056. We have not considered this case as we do not think it is relevant to this hearing.

47 Mr Cannan for the Commissioners submits that the Commissioners accept that in deciding whether the supply is “in the course of catering” the following questions should be considered:-

(a). Catering amounts to something more than merely a supply comprising a food item.

(b). Catering involves the provision of a service or number of services associated with food

(c). The nature and extent of the service involved in catering will vary according to the context and according to the type of food involved.

In relation the sandwich platters the Commissioners say:-

(a). The sandwich platters appear on the “ Business Food Platter” covering a wide range of food options;

(b). Orders are taken in advance.

(c). Orders are taken and charged for per person per serving.

(d). There is a minimum order size of 5 servings and a total minimum order of £15;

(e). Food is prepared to order and delivered in the platters without the need for any further preparation.

(f). The food is delivered to the purchaser rather than collected, with a separate delivery charge per item.

(g). Cutlery, condiments are available on request.

48. Mr Tyler for the Appellant referred the tribunal to several of the cases discussed above. He submitted the only factor of those specified by Keene J in the Safeway decision, which is relevant to this case, is the delivery of the food to the clients’ premises. The platters are not supplied in respect of any particular occasion or

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event. Items are likely to be placed on to individual plates by the customers and no crockery cutlery or ancillary items are provided. The food is not served by the Appellants. He suggested that the case of Out to Lunch was in all aspects similar to this case. The only difference between the two cases is that the baskets in Out to Lunch were returnable and the Appellants platters are disposable.

49 Dealing with the first issue before us, the supply of sandwiches and cold food in platters to the offices. In our judgment these are not supplies “in the course of catering”. The series of cases after Cope maintained that if there was a function, then it was likely that the supply would be “in the course of catering”. We are satisfied that the Appellant, when delivering the platters to its customers was totally unaware as to whom would be eating the food. We cannot accept Mr Cannan’s proposition that as the platters contained 20 quarters of sandwiches in them, this meant that they would supply a reasonable number of customers, who ate together, and that this constituted an event or function. As Mr Tyler submitted there is no function or event. Nor do we think that there was any sort of “nexus” between First Taste and the customers. The only difference between this case and Safeway is that the platters were delivered to the customers. It is arguable that as the platters in Safeway were called “Party Trays” that the judge might have found that a function must have been anticipated. He did not. Nor is there any element of service other than the delivery to the offices. In this context we agree with Mr Tyler that the case of Out to Lunch is very similar to this case. There is no evidence of the sort of service provided in Hodges T/A Priory Kitchen. In Lawson T/A Country Fayre where the chairman considered the supply was “in the course of catering” because the “nature of the food provided was perfectly capable of constituting and in most cases no doubt did constitute a complete meal”. This is a theme taken up by Mr Bishopp in Compass when he suggests that “ the human metabolism requires fuel at regular intervals”. In our judgment sandwiches are no more than a snack and require very little effort for their production and delivery. The fact that they are garnished and presented attractively, does not, in our opinion elevate them to a full meal and thereby constitute a supply “in the course of catering”. For all the above reasons we are satisfied that the sandwiches and cold food were supplied as “food of a kind used for human consumption” and are therefore to be zero-rated. We believe that an ordinary person would not regard First Tastes activity in supplying the sandwiches in the platters as “in the course of catering”. The second issue is the supply of the business lunches to the customers in the Manchester offices. In our judgment these are different. Whilst they are packaged in the same way as the sandwiches they are, in our judgement, a complete meal. It is one thing to provide sandwiches but the supply of Sausages Rolls, Cheese Roulades etc manufactured at the Salford Premises by the Appellant requires a culinary expertise beyond the putting together of sandwiches. These platters are undoubtedly a complete meal. As in Lawson T/A Country Fayre and Taylor T/A Sandwich Heaven” the Appellants “were supplying more than sandwiches in a convenient form for large numbers”. As Mr Cannan submitted catering involves the provision of a service or a number of services associated with food. “Food of a kind used for human consumption” has to be strictly interpreted and in our judgement the preparation of the above items for a business lunch extends the term too widely. We are helped in our decision by the fact that Mr Taylor on behalf of the Appellant thought that the platters should be standard rated, as that is how they are charging for them. We suggest that the view of the proprietors of

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First Taste in that regard must also be that of “the ordinary person” and therefore satisfies the Safeway test and the supply must therefore be “supplied in the course of catering”. Further the same menus supplied in the Airport and Chester Units are undoubtedly treated as substantial meals and the menu even suggests that they might be for a function in pricing them per “delegate”. We have therefore decided that the supply of the Business Lunches must continue to be standard rated.

50 As to the “on the Premises” proposition Mr Cannan submitted that the supplies made from the food outlets in the two units amounted to supplies of “food for consumption on the premises on which they are supplied”. The Appellant occupied the units for the purpose of providing catering facilities to persons using the entire Regus building. The Appellant does not enjoy complete control over the hours it has to work and the requirement to operate the retail concessions cannot be separated from the obligation to provide ‘delivered corporate catering’ as they form part of the same contract.

51 Mr Tyler submitted that the Appellant had been granted the right to occupy two designated units within multi-occupancy buildings operated by Regus. The retail units consist of a distinct room on the ground floor of the building for the supply of hot and cold food and drink. The units contain an area for the preparation of the food, a serving counter and chairs and tables where food can be eaten on those premises. Other people as well as employees within the building use the facility as there is no barrier to entry to the unit. As a result, the supply of sandwiches and cold food to be taken out of the unit and eaten within the rest of the building or outside is not “a supply of food for consumption on the premises on which they are supplied”.

52 Dealing with the “on the premises proposition” in our judgment the supply is not “ a supply of it for consumption on the premises on which it is supplied”. Unlike the facts in Compass where there was no formal lease or licence of the 6 units in question, the Appellant in this appeal has been specifically allocated a definitive area from which food is to be supplied. The facts confirm that there is a sitting area for food to be eaten. In so far as food is eaten within the unit it is undoubtedly supplied “on the premises” and must therefore be standard rated. That is not in dispute. The Commissioners contend that where sandwiches and cold food are supplied from the unit to be eaten within the building, rather than in another building away from the unit, they are supplied “for consumption on the premises on which it is supplied” because the agreement for the concession has to be viewed as a whole and it is not possible to strip out the supply of the sandwiches and cold food to be taken out of the units. Whilst there is some force in that argument we think it is erroneous. The cases have prompted us to look at the substance of what is happening and not necessarily be bound by the terms of an agreement. We are satisfied that the premise must be limited to the units themselves. Whilst we can be liberal in our interpretation of the exception we think it is going too far to extend the meaning of premises to the whole building. The Appellant is supplying sandwiches to be taken away and we cannot see how that is any different from the high street shop selling sandwiches to take out. The cases of Bristol City Football Supporters Club and Mr Giuseppe Bergonzi T/A Beppi’s Buffet Service make it clear that for the service to be “on the premises” the premises must be identified as confined to the customers involved. In Bristol the football supporters at

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the match and in Bergonzi the employees of the Evans Group. Here the customers come from various places, other buildings and within the complexes. In Sims the unit was 12 foot by 12 foot and Taylor J was quite satisfied that this was the only premises over which she had control. It seemed to him “ to be impermissible to latch on to the mere geographical fact that other quite discrete and separate commercial premises happen to be in the same block and for that reason to lump them together as ‘the Premises’ within the meaning of the phrase in note (3) (a). In Compass Mr Bishopp was satisfied that even though there was no specific agreement as to the ownership of the 6 units the BBC and others accepted that those were the units made available to the appellants in that case. Further even though the 6 units were spread out within the buildings he still, was of the opinion, like Taylor J that the units were ‘the Premises’ for the purposes of note 3 (a) and not the buildings which contained them

53 The Airport and Chester Units are self-contained. We do not think that because employees could pass through the Airport Unit this somehow made it an integral part of the Building. We are satisfied from the evidence that much like the personnel in Sims others as well as the employees of Regus PLC used the units. Nor are we satisfied that, the references in the brochure for Regus PLC suggesting that the buildings were self-contained makes any difference. The units are “the premises” and no more. As a result the supply of the sandwiches and cold food to be taken out of the units and eaten elsewhere are the supply of “Food of a kind used for human consumption” and are to be zero-rated. Food eaten within the units, are supplied “for consumption on the premises on which it is supplied” and the Business Lunches are supplied “in the course of catering” and they are both to be standard rated.

54 Mr Tyler requested that if the appeal was allowed the Appellant should be awarded costs. We therefore award such costs as the parties agree between them and if they fail to agree such costs as shall be awarded by a tribunal on a separate application as to those costs. We are not minded to reduce the level of those costs because we have found that the business lunches amount to “a supply in the course of catering”. Prior to this hearing the Appellant has been treating them as such paying the appropriate amount of VAT and as a result shall continue to do so.

David S PorterCHAIRMAN

RELEASE DATE: 4 April 2006

MAN/05/0059

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