Fowl play: Morrisons loses £17m VAT battle over rotisserie chickens
Supermarket giant Morrisons faces a £17m tax bill after the First-Tier Tax Tribunal threw out its dispute over VAT on cool-down rotisserie chickens.
The dispute arose from George Osborne’s controversial 2012 Finance Act changes that sought to clarify the VAT treatment of hot takeaway food, famously known as the “pasty tax” debacle.
Morrisons tried to insist the purpose of heating their chickens was to sell them as “freshly cooked,” not “hot takeaway” (which would have attracted VAT) bu the Tribunal disagreed with its arguments and dismissed its appeal.
The First-tier Tribunal ruled that cool-down rotisserie chickens are “hot food” and therefore supplies made “in the course of catering,” meaning they are not zero-rated for VAT.
On top of that, the Tribunal concluded that the chickens were “kept hot after being heated” because Morrisons stored them in a heated environment.
The decision has left Morrisons facing a £17m VAT debt for the VAT covering the period from January 2017 to July 2020.
Bones of contention
On the supermarket’s ability to appeal, Simon Knivett, VAT Manager at HW Fisher, explained, “For Morrisons to be able to appeal this case, they would have to prove an error on a point of law which seems difficult given the rationale for the ruling and a very extensive assessment which the above summary barely scratches the surface of.”
He added that consumers “are likely going to see an increase in the price of their rotisserie chickens” moving forward unless supermarkets decide to lower their profit margins.
“This is applicable not just to Morrisons but to any other supermarket or shop which sells rotisserie chickens and to date has not accounted for 20 per cent VAT on the sales,” he added.
Knivett highlighted that “food and beverages are one of the most complex areas of VAT“.
Over the last couple of years, a VAT case involving giant marshmallows has caused considerable confusion. In October, the Tribunal ruled in favour of Ferrero UK, stating that their ‘Nutella Biscuits’ are zero-rated for VAT. Even back in the Summer, M&S’s viral Japanese strawberry sando, while taking the internet by storm, raised questions about VAT.