HMRC challenge to exempt catering for Students' Unions
HMRC has succeeded in their challenge so that Unions cannot apply the concession allowing catering to students to be treated the same way as the University, as exempt from VAT, when such catering takes place in a venue described as a ‘bar’.
After five years of debate and dispute, a Judicial Review in 2025 decided against the argument that bars were catering outlets. The approach to the litigation (focusing upon the outlet rather than the nature of the supply) and the decision (a venue can have many purposes) both seem flawed.
However, with no further recourse, Unions need to abide by HMRC's approach even though the supply of catering is the same whether the venue is called a bar or, say, a café.
Is my Union potentially affected?
Most Unions do not have bar catering.
Many of those who have bar catering will likely have already been contacted by HMRC, and a VAT team from the Department appears to be visiting all those with outstanding assessments or otherwise whom they are aware of.
If, however, you do provide catering in venues described as bars, and even if not contacted by HMRC, applying the concession no longer appears viable.
What does HMRC consider to be a bar?
A set definition of a ‘bar’ has still not been provided by HMRC, but what the venue is called (‘bar’ or ‘pub’) and if the venue has more than a minimal level of alcoholic drinks sales seem to be the two key factors. Strangely, HMRC seem to have allowed the concession to apply if sold from a dedicated, separate till.
How far can HMRC go back for an assessment?
HMRC's firm view is that its public notice and guidance are clear, but this seems contradicted by the guidance being reworded: the notice issued some years ago and the guidance issued in the last year or two. It does not seem to have improved readability in either case.
Despite providing arguments against HMRC's retrospective action (especially as at least 3 Unions received rulings allowing the concession to apply to bar catering), HMRC can and has still made assessments within the last four years for such ‘bar’ sales.
It also appears that penalties may apply, where Unions received rulings, disagreed, and continued to apply the concession. The fact that matters have been unclear and inconsistent, and that a genuine legal challenge was in play until relatively recently, appears not to have been a factor considered by HMRC.
What should Unions do now?
We recommend reviewing your arrangements if you consider there is a risk of HMRC challenge where no contact has taken place. If the activity is clearly bar catering, a proactive approach of adjusting out use of the concession needs to be considered, especially as this may help mitigate the risk of penalties.
Please liaise with your advisers as necessary, and if you would like to discuss your individual circumstances further, please get in touch via your usual Crowe contact.
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