The Court of Appeal judged that Compass's supply of sandwiches and similar cold prepared foods to six sites within the BBC Television Centre should be zero-rated for VAT purposes.
The case hinged on the definition of the word 'premises'. Previously VAT on food sold in restricted access premises, such as offices, cinemas and sports stadia, has been standard rated as it has been considered a catering supply.
But now cold prepared food is only defined as a supply in catering, and subject to standard VAT, if the point-of-sale also has facilities to allow the customer to consume it there.
So sandwich bars and other food outlets that do not have seats and tables, for example, will now be treated as normal retail outlets. The ruling in theory means the cost of ready-made sandwiches to caterers and consumers could fall by 17.5%.
Alan Connell, VAT director at Eversheds, said the ruling could have broad ramifications. "I am sure that there will be suppliers in similar positions elsewhere, given the tendency for catering at entertainment and sporting venues to be outsourced."