All academies offer lunchtime meals to pupils. Often meals are also provided to staff and visitors, either for no charge or on a paid basis.

However, that is where the simplicity ends.

The way that the meals are delivered gives rise to a number of possibilities and VAT consequences. There are also special VAT rules affecting catering and sales of certain foods.

There possible arrangements include:-

1. The external catering contractor operates the catering entirely (i.e. as “principal”)

  • The caterer charges the pupils directly for meals. The charge will include VAT as the caterer cannot treat the service as a non-business activity ancillary to the provision of education.
  • The caterer takes a commercial risk in providing the service, including bearing the cost of the food used.
  • The academy may charge a rent for use of the kitchens (which may be a fixed amount or a percentage of takings).

2. The external catering contractor acts as an agent of the academy

  • The academy is making the supply of meals to pupils and controls the arrangement (prices, facilities, etc.).
  • Meals provided by the academy to pupils are a non-business supply when charged at cost or less and are therefore not subject to VAT (outside the scope).
  • The caterer is just providing food preparation, serving and/or cash handling services to the academy. These services will be subject to VAT at the standard rate, but will be recoverable by the academy where the service relates to pupil meals.
  • It does not matter whether the food is bought by the academy or the contractor. If the catering contractor buys the food this will be sold to the academy using the normal rules applying to food. Again any VAT incurred can be recovered by the academy where it is for consumption by pupils.

3. Catering staff are supplied by the contractor

  • A special concession, agreed with the British Hospitality Association many years ago, allows the external contractor’s charges for staff supplied to be treated as a disbursement. As a result the wages costs being passed on to the academy are not subject to VAT (outside the scope).
  • The concession requires that the catering contractor is only acting as agent, not principal, and that the charge relates to employees who only work for one academy and that the wages cost is identified when invoicing.
  • VAT is still charged by the contractor on its management charge (i.e. on anything other than the amount of wages it pays its staff).

If it is not immediately apparent which arrangement exists, checking the contract terms should clarify the position.

VAT Treatment


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