VAT Guidance – Catering Contracts

VAT Guidance – Catering
November 2011
Greg Watson
 Contracts entered into with external
catering suppliers can be complex and
can lead to VAT management issues.
 Important that Input VAT and Output VAT
are not netted off
 Also important for correct financial
reporting that income and expenditure are
not netted off.
VAT Efficient Contract Structure
 Contractor bills school for service with VAT at
standard rate – acts as principal
 School recovers VAT paid in the usual way.
 Contractor may collect income from pupils – acts
as agent
 Supply of meals by school incidental to
education, hence outside scope of VAT and
available to offset cost of the meals to the
schools budget.
Schools Responsibilities
 Correct amount of VAT should be declared to
HM Revenue & Customs.
 Particularly for Output VAT on staff/visitors
 Cost of Staff free meals needs to be coded to
 Suppliers responsibility to provide correct and
fully compliant VAT invoice.
 If insufficient detail then should be requested.
Receipt of catering income:
 Where school receive catering income directly,
staff/visitor income should be credited to A872 so
that Output tax is collected. Responsibilities
 Where the catering company acts as agent by
collecting income on school’s behalf a change in
the way we process the invoice is required.
Accounting Implications:
 Please refer to Appendix A.
 Schools pay through Accounts Payable
£3,696.72 & VAT £1172.08 – Total
 Need additional journals to account for
Output VAT and full expenditure and
income received
Accounting actions :
 Enter invoice figures in ‘Catering
 Pass two Cash Book Journals and
reconcile bank entries
 VAT Submittal now includes Output tax
 Correct VAT claimed and paid to HM
Revenue & Customs
 Schools accounting responsibilities now fulfilled by
adopting amended process
 Individual SFOs will work with schools to instigate
where required
 Information available on