VAT News

Catering Provision at Extra Care Schemes


This can be a challenging area for Housing Associations as tenants look for increased flexibility in their tenancy arrangements in Extra Care Schemes.

Increasingly associations are seeing competition from high street food chains on “value for money” meal deals which can compete in urban settings in terms of catering options for some residents. However, for less mobile clients an inhouse catering provision remains an important part of the service they require.

The question has been raised as to the VAT treatment which will apply to such catering provision. The answer will be influenced by the nature of the actual arrangement with the tenant. Where the tenancy in a sheltered care scheme is on a fully inclusive basis then the catering recharge will form part of that care agreement. The agreement is regarded as a composite supply of welfare services to which the accommodation and catering is ancillary and therefore should be VAT Exempt in liability.

What happens when associations start to give more meal options to residents however? A recent project with a client dealt with exactly this issue. The association had been accounting for VAT on the meal charges to residents who utilized the catering service as an optional extra within their arrangements. The residents having ordered a meal from the menu choices for that week may well have needed assistance to bring them down to the restaurant area, may have required assistance with eating the meal or simply would have had someone to check in their room should they be late in arriving in the canteen area.

This we argued with HMRC incorporated elements of welfare services which took it beyond a separate contracted catering provision and qualified it for a VAT Exempt treatment on income which HMRC accepted.

There will be other examples where the catering offering is clearly contracted separately from any other service provision – indeed the provision of the accommodation may be the core component of the tenancy agreement making the supply one of residential accommodation on a VAT Exempt basis rather than a Welfare provision of care services. Tenants may be self sufficient in terms of their personal care and mobility therefore how their options regarding catering are offered to them may be very different from the traditional residential care offering.

It’s an example of where clarity of the offering to the tenant does need thinking through from the VAT perspective to avoid an incorrect VAT treatment arising.

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