SU Catering Issue - overview from RSM

Thanks to Daniel Guy of RSM who has provided this overview of the SU catering issue, ahead of the Time to Talk  session on 11 January with the NUS and RSM.

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Students’ Unions – VAT and catering services

 Most Students’ Unions (SU’s) currently enjoy a concession detailed in VAT Notice 709/1 (Catering, takeaway food) which explains that the supply of catering by SU’s to students of the university can be treated as exempt for VAT purposes.

The guidance also explains that food and drink sold by SU’s from bars is not covered by the concession and therefore these sales would be standard rated.

It has become apparent from recent activity that HMRC is running a campaign to challenge how SU’s are operating the concession in relation to catering provided in certain areas which also sell alcohol or are perceived as bars rather than restaurants.

 What has changed?

 It seems there has been an internal change of policy due to the position which HMRC is currently taking.  Historically, HMRC had previously been satisfied that catering supplied in a bar was considered to be exempt and only food (bar snacks) and alcoholic drinks did not fall within the exemption.

Current HMRC officers involved in the campaign, do not seem to be aware of the historical interpretation or are simply ignoring it.

What does this mean for SU’s?

 SU’s are now unexpectedly being assessed for under declared output VAT on sales of catering.  Interest and penalties may also become due.

In the future SU’s will not be on the same footing as universities when supplying catering to students.  SU’s catering will inevitably be more expensive for students.

 Support available

 SU’s which have been attacked by HMRC and not conceded the position, have mostly sought to defend the existing treatment on the basis of the historical treatment by HMRC and HMRC has not previously instructed the SU to account for VAT on catering services provided in bars .

RSM has completed a number of reviews, for individual SU’s, to identify historical correspondence which conclusively or indirectly provides guidance which enables exemption to be applied more widely than the current HMRC interpretation.  Alongside technical arguments, at the time of writing, RSM has been able to provide a robust defence for its clients.

Such a review may also be beneficial, even if HMRC has not yet challenged, to ensure that the issue can be dealt with effectively in the accounts and that auditors can be provided with the necessary comfort or otherwise. 

Furthermore, the National Union of Students (NUS) is seeking group action and beginning to develop a ‘fighting fund’ so that HMRC can be challenged more widely on its change of policy.

 Summary

If an SU provides catering services in an area that could, in the broadest sense of the word, be considered to be a bar at any time during the day, it should take action immediately.

If you would like to discuss the issues contained above in more detail, please contact Daniel Guy daniel.guy@rsmuk.com.  Daniel is working closely with the NUS and can also refer you directly to those managing the fighting fund.