In Pegasus (Manchester) Limited v HMRC [2018] TC06382, the First-Tier Tribunal (FTT) found that a bain marie was used to keep food above ambient temperature meaning it was considered hot food.

Where food is sold which is not considered Catering supplies, it will normally be standard rated if considered 'hot', or zero-rated otherwise. See Food: catering and takeaway.

  • Pegasus provides freshly prepared ‘healthy food’ seven days a week out of a retail unit at a market.
  • A single batch of food is prepared at 6am, cooked to near 100C.
  • The food is cooled in the pans using a fan to accelerate the process.
  • When the food is cooled to near 20C, normally by 10am, the food is placed into containers.
  • At 11am when the retail unit opens, one container (of each food type) is placed in the bain marie, set at 56C, and the other containers are kept in the retail unit at room temperature.
  • Food is typically kept in the bain marie for up to 1.5 hours and when the container is finished one of the room temperature containers is swapped into the bain marie.
  • Most of the food is sold between midday and 2pm.

The taxpayer argued that the food was not ‘hot food’ and should be zero-rated:

  • They do not intend to sell the food hot as it loses its unique flavour.
  • It is intended to be served at ambient temperature which is why it is cooled.
  • They were required to have displayed food kept in containers heated to a certain temperature by Food Safety and Hygiene Regulations.
  • They did not monitor the temperature of the food.
  • The bain marie’s temperature bears no reflection on the temperature of the food.
  • In correspondence HMRC agreed the food was served ‘warm’ not hot.

The taxpayer argued that the food would not have heated above the ambient temperature once cooled, as the temperature in the kitchen was approximately 28-30C.

The FTT relied on ‘basic physics’ in agreeing with HMRC:

  • The food would have raised to ambient temperature after cooling and before being placed in a bain marie an hour or so later.
  • Food at ambient temperature entering a bain marie at a higher temperature and remaining there for some time will result in the food being heated to above ambient temperature.
  • Food Safety and Hygiene Regulations require the container to be heated to 63C. The taxpayer said that they heated to 56C as they believed the ‘hot holding defences’ applied. This means the food is not heated solely for food safety legislation.

The FTT stated that the burden was on the taxpayer to prove the food had not raised above ambient temperature and as it was not monitored, based on the above, the FTT concluded the food was ‘hot food’ and standard rated.


Food: catering and takeaway

External: Pegasus (Manchester) Limited v HMRC [2018] TC06382


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