High street bakery and coffee shop chains are expected to challenge HMRC over VAT on takeaway products, such as sandwiches and savouries, following a landmark ruling by the European Court of Justice.

The court recently found in favour of German takeaway owner Manfred Bog, who successfully argued that he should not pay VAT on grilled sausages, because so little preparation had gone into them that they should be considered a non-VATable foodstuff rather than a ‘catered service’.

The ruling could eventually lead to a flood of claims from UK foodservice operators supplying simple-to-prepare products.

“We’ve had a lot of enquiries from coffee shops, sandwich chains and event catering companies about whether they have room to make a claim. Foods where preparation is limited to basic processes, such as boiling, grilling and baking, are likely to have the best chance,” said Karen Mulcahy of The VAT Consultancy.

The UK’s domestic VAT rules differ from those in Germany, with some foods zero-rated and others at full rate, while VAT is charged on products considered ‘hot takeaway’ food. However, the UK has to comply with EU regulations and the recent ruling leaves room for retailers to appeal.

“The way UK law is written, hot takeaway food is considered a ‘catered service’ and this would need to be challenged,” said Mulcahy.

HMRC has denied that the European Court decision applies to the UK, but a challenge, possibly from a consortium of different parties, is now expected.

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