In addition to the formal lunchtime meals provided to pupils, many academy also provide vending machines to allow additional drinks and snacks to be purchased.
The provision of meals is considered to be closely-related to education and so is treated as a non-business supply.
Vending machines can be operated on a similar basis, where the income is designed to do no more than cover the costs or they can be operated on a fully commercial basis with the intention of generating additional income for the academy. This will affect whether the income is treated as a business or non-business supply.
If the machine is intended to operate at or below cost it will generally be considered as being closely-related to education for the purchases made by pupils. Purchases by others will not receive the same treatment and will be considered as business supplies.
The sale of food and drink as a business supply will follow the usual rules for sales of food and so it will be necessary to check the treatment for each individual items in HMRC Notice 701/14 on food to confirm whether it is zero-rated or standard rated. Particular care is required for “sports drinks” and where chocolate is used on, say, biscuits.
The dispensing of hot drinks (or heated food) is a supply of catering and so will be subject to VAT at the standard rate unless for consumption by pupils.
Where the vending machine is owned and operated by a third party with the academy receiving a payment, either as a variable commission or fixed rental, it has previously been argued that the supply is a VAT exempt right to occupy land, but the correct treatment is that this is a standard rated supply, as the right to site a vending machine in a location falls short of an exclusive right to a specific area of land. Many operators may self-bill this commission and it is important to check that they are correctly including VAT in the amount payable.
If the VAT rate for a particular foodstuff is not clear please contact us for more guidance.
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